Dividend Aristocrats In Focus: Abbott Laboratories

Up to date on March twenty seventh, 2024 by Bob Ciura

Abbott Laboratories (ABT) is a really well-known dividend development inventory, and for good cause. The corporate is a member of the unique Dividend Aristocrats, a gaggle of elite dividend shares with 25+ years of consecutive dividend will increase.

We imagine the Dividend Aristocrats are among the many finest dividend shares to purchase and maintain for the long-term.

With this in thoughts, we created a full record of all 68 Dividend Aristocrats. You may obtain the complete record, together with necessary monetary metrics resembling dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:

Disclaimer: Positive Dividend just isn’t affiliated with S&P International in any approach. S&P International owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet relies on Positive Dividend’s personal assessment, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person buyers higher perceive this ETF and the index upon which it’s based mostly. Not one of the info on this article or spreadsheet is official information from S&P International. Seek the advice of S&P International for official info.

Abbott is diversified throughout a number of areas of well being care, every of which has constructive development potential for the long run. This has fueled Abbott’s spectacular historical past and can proceed to take action within the years forward.

This text will talk about the funding prospects of Abbott Laboratories intimately.

Enterprise Overview

Abbott Laboratories is a diversified healthcare company with a market capitalization of $193 billion. The corporate was based in 1888 and is headquartered in Lake Bluff, Illinois.

The corporate operates in 4 foremost segments: Dietary Merchandise, Established Prescribed drugs, Diagnostics, and Medical Units. Abbott enjoys a management place throughout product segments.

The corporate’s Diet Merchandise section is the #1 pediatric vitamin supplier in the USA and another geographies. Furthermore, the section’s efficiency has improved significantly lately because the working margin has improved each 12 months since 2011.

Abbott Laboratories’ final section is the Medical Units unit. This section was considerably bolstered in latest occasions by the St. Jude Medical acquisition.

Supply: Investor Presentation

On January twenty fourth, 2024, Abbott Laboratories introduced fourth quarter and full earnings outcomes. For the quarter, the corporate generated $10.24 billion in gross sales (61.4% exterior of the U.S.), representing a 1.4% enhance in comparison with the fourth quarter of 2022. Adjusted earnings-per-share of $1.19 in comparison with $1.03 within the prior 12 months.

Income was $50 million greater than anticipated whereas adjusted earnings-per-share have been in-line with estimates. For the 12 months, income decreased 8.2% to $40.1 billion whereas adjusted earnings-per-share of $4.44 in contrast unfavorably to $5.34 in 2022, however matched the midpoint of the corporate’s steerage.

U.S. gross sales declined 14.8% whereas worldwide was decrease by 3.3%. Firm-wide natural gross sales decreased 6.2%. Nonetheless, excluding Covid-19 testing merchandise, natural development was 11.6%. Diet gross sales grew 13.9% organically as the corporate continues to see a restoration in market share of its toddler components enterprise following a stoppage of manufacturing in 2022.

Progress Prospects

Over time, Abbott Laboratories has proven the aptitude to reliably develop its adjusted earnings-per-share. Abbott Laboratories spun off AbbVie (ABBV) in 2013, and each companies have carried out effectively for the reason that spin-off.

Trying forward, Abbott Laboratories has two main development prospects that may assist its enterprise to turn out to be more and more extra worthwhile through the years to return.

The primary is the getting old inhabitants, each domestically and inside the USA. In 2019, the proportion of the worldwide inhabitants that exceeded the age of 65 was 9.1%. This proportion is predicted to achieve 16% in 2050.

The second broad tailwind that may profit Abbott Laboratories is the corporate’s give attention to rising markets. That is significantly true for its Branded Generic Prescribed drugs section.

Lots of the international locations that this section is targeted on are spending a really small proportion of their total GDP on healthcare, a price that’s anticipated to extend sooner or later.

The getting old home inhabitants mixed with the moderately low give attention to healthcare spending in rising market international locations ought to go away Abbott Laboratories loads of room to develop for the foreseeable future.

We anticipate 7% annual EPS development over the subsequent 5 years for ABT.

Aggressive Benefits & Recession Efficiency

Abbott Laboratories’ aggressive benefit is two-fold. The primary part is its exceptional model recognition amongst its shopper medical merchandise, significantly in its Diet section. Led by noteworthy merchandise just like the Guarantee meal substitute complement, Abbott Laboratories manufacturers permits its gross sales to face robust by way of even the worst financial recessions.

The second part of Abbott’s aggressive benefit is its give attention to analysis and growth. Its funding in analysis & growth reveals that the corporate is keen to play the lengthy recreation, constructing out its product pipeline and enhancing its long-term enterprise development prospects.

As a big, diversified healthcare enterprise, Abbott Laboratories is very recession-resistant. The corporate really managed to extend its adjusted earnings-per-share throughout every year of the 2007-2009 monetary disaster.

2007 earnings-per-share of $2.84
2008 earnings-per-share of $3.03 (6.7% enhance)
2009 earnings-per-share of $3.72 (22.8% enhance)
2010 earnings-per-share of $4.17 (12.1% enhance)

Remarkably, Abbott Laboratories managed to develop its earnings-per-share in the course of the world monetary disaster – one of the economically troublesome time intervals on report. On the identical time, the corporate’s share depend elevated. Which means Abbott Laboratories didn’t use share repurchases to develop earnings-per-share, they have been merely extra worthwhile throughout a tumultuous time.

We anticipate this recession-resistant Dividend Aristocrat to carry out equally effectively throughout future downturns within the enterprise setting.

From a dividend perspective, Abbott Laboratories’ dividend additionally seems very protected. ABT has an anticipated dividend payout ratio barely beneath 50% for 2024.

Valuation & Anticipated Whole Returns

Abbott Laboratories is at present buying and selling at ~$113 per share. Utilizing the midpoint of the corporate’s steerage for the 12 months provides the inventory a price-to-earnings ratio of 24.6.

Abbott Laboratories’ price-to-earnings ratio has typically hovered between 20 and 25 over the previous 5 years. The present valuation is on the excessive finish of this vary.

We really feel {that a} truthful price-to-earnings ratio of 20 is extra acceptable within the present setting. If shares revert to our truthful worth estimate of 20 by 2029, then valuation can be a 4.1% drag to annual returns over this time period.

The opposite main part of Abbott Laboratories’ future whole returns would be the firm’s earnings-per-share development. We anticipate that this development is more likely to proceed, and buyers can moderately anticipate 7% in annual adjusted earnings-per-share development transferring ahead.

Lastly, Abbott’s whole returns will obtain a lift from the corporate’s dividend funds. Abbott Laboratories now has a dividend development streak of 52 years, preserving its Dividend King standing.

ABT inventory has a present dividend yield of two.0%. Total, Abbott Laboratories’ anticipated whole returns will likely be composed of:

7.0% earnings-per-share development
2.0% dividend yield
-4.1% a number of reversion

Whole anticipated annual returns are forecasted at simply 4.9% by way of 2029. This can be a pretty low anticipated price of return as a result of overvaluation of the inventory this present day.

Remaining Ideas

Abbott Laboratories has most of the traits of an interesting dividend funding. It has a recession-resistant enterprise mannequin that enables it to proceed rising earnings-per-share by way of varied financial environments. It additionally has a protracted historical past of steadily rising dividend funds.

That stated, we imagine that the inventory’s present valuation prevents it from providing robust return prospects within the coming years, which is why we price Abbott Laboratories a maintain proper now.

In case you are fascinated by discovering high-quality dividend development shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:

The main home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month: