It’s surprising to me that among dividend-focused investors, AbbVie (NYSE:ABBV) isn’t a hot topic of discussion. Perhaps that’s because AbbVie stock tends to get pigeonholed as a Big Pharma bet. Meanwhile, dividend investors sometimes tend to focus their attention on energy stocks and real estate investment trusts (REITs).
But why can’t AbbVie stock appeal to different types of investors? Market participants can view the stock as both a dividend darling and as a pharmaceutical powerhouse. It doesn’t have to be an either-or type of situation.
Heck, even deep value investors can find something to like about AbbVie stock. Actually, the drugmaker niche is bargain-priced overall. J.P. Morgan analyst Chris Schott observed that drug-sector stocks are trading at 13.5 times projected 2021 earnings, while the S&P 500 trades at 20.2 times projected 2021 earnings.
Is there anything special about AbbVie stock in particular, though? That’s a valid question, so let’s take a deep dive into a unique pharma juggernaut with eye-catching yield.
A Closer Look at AbbVie Stock
I’ve been teasing AbbVie’s dividend yield, so now it’s time for the big reveal. As I’m writing this, AbbVie stock’s forward annual dividend yield is a very healthy 5.26%. Moreover, the company just announced that it’s keeping its quarterly dividend steady at $1.18 per share.
That’s great news in a time when many companies have been compelled to reduce their dividend payouts or even eliminate them altogether.
Meanwhile, value-oriented investors should appreciate AbbVie stock’s trailing 12-month price-earnings ratio of 19.83. That’s fairly competitive among the company’s peers in the pharmaceutical industry.
As for the price action, AbbVie stock has retraced somewhat from its 52-week high of $101.28. Therefore, this could be an ideal time to start accumulating the shares in anticipation of an eventual breakout above $100 and then $110.
An Important Partnership
Sometimes, there’s much more than money at stake in the pharmaceutical market. Indeed, AbbVie’s recently announced collaboration with Chinese drugmaker I-Mab (NASDAQ:IMAB) could actually produce lifesaving treatments.
In a mega-deal that may end up totaling more than $2 billion in value, AbbVie intends to work with I-Mab to develop lemzoparlimab, a leading multiple-cancer drug candidate.
With this action, it’s clear that AbbVie is seeking to move beyond its highly successful flagship drug, Humira. A major moneymaker for AbbVie, Humira is designed to treat Crohn’s disease, ulcerative colitis, psoriasis, multiple forms of arthritis and other conditions.
Some AbbVie stock holders have been calling for the company to expand its pipeline for quite a while. The partnership with I-Mab represents a branching out and, it seems, a reduction in dependence on Humira.
A Global Vision
The arrangement with I-Mab for access to this cutting-edge pharmaceutical technology doesn’t come with a low price tag. Heck, just the up-front payment will cost AbbVie $180 million.
Will the partnership be worth the cost of admission? Thomas J. Hudson, AbbVie’s senior vice president of R&D and chief scientific officer, notes the far-reaching significance of a team-up that could alter the medical landscape as we know it:
“Cancer is the second-leading cause of death globally and the need for novel cancer therapies has never been more acute. The addition of I-Mab’s novel CD47 programs complements our global clinical strategy in hematology and immuno-oncology.”
Still, investors can’t be faulted for focusing on the bottom line. And there’s no guarantee that any products of this partnership will be successfully developed, approved and commercialized.
But hey, that’s the nature of pharma investments. There’s always a speculative aspect to owning drugmaker stocks. That being duly noted, AbbVie is a respected pharma giant and with sweet dividend payouts to tide you over, awaiting the outcome of clinical trials won’t likely be a waste of your time.
The Bottom Line
The steady dividend distributions provide a strong incentive to own AbbVie stock.
Along with that, the diversification beyond Humira should put AbbVie front and center in any serious pharma investor’s watch list.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.