Editor’s note: This column is part of InvestorPlace.com’s Best Stocks for 2021 contest. Bob Ciura’s pick for the contest is AbbVie (NYSE:ABBV) stock.
Heading into 2022, I recommended investors take a closer look at pharmaceutical giant AbbVie (NYSE:ABBV) because the stock possessed several key factors that could make for a good investment. First, AbbVie’s earnings growth was strong and poised to continue due to its high-quality product portfolio.
Next, AbbVie stock was notably undervalued. Finally, AbbVie stock also provided a high dividend yield, with regular dividend increases — AbbVie is one of just 66 Dividend Aristocrats, and one of just 40 Dividend Kings.
Fast forward to today, and AbbVie shareholders are sitting on a year-to-date total return of 20% as of the end of the quarter (March 31), compared with a 4.9% total loss for the broader S&P 500 index over the same period. AbbVie has trounced the market so far this year. And while AbbVie stock is not as cheap as it was entering the year, it can still offer satisfactory returns to investors.
ABBV Stock Quarterly Earnings
The company has continued to execute on its strategic priorities. To that end, AbbVie released another strong quarterly report on Feb. 2. The company reported quarterly revenue of $14.9 billion, up 7% year-over-year. Revenue growth was positively impacted by increases from Skyrizi and Rinvoq, two of its top growth products. Earnings per share came to $3.31 for the quarter, a 13% year-over-year increase.
AbbVie saw broad-based growth across its portfolio. Fourth-quarter global net revenues from the immunology portfolio rose 13% from the same quarter last year as global Humira sales increased 3.5%.
Meanwhile, global net revenues from the hematologic oncology portfolio increased 4.7% operationally, led by Venclexta which grew revenue by 34% for the quarter.
Elsewhere, AbbVie’s global neuroscience revenue increased 19%. Net Venclexta revenues were $488 million, an increase of 33%. Lastly, AbbVie’s global aesthetics portfolio grew revenue by 23% for the fourth quarter, due to 27% growth in global Botox revenue. The aesthetics portfolio was the foundation of AbbVie’s massive acquisition of Allergan in 2020.
2021 was an even stronger performance. For the full year, revenue of $56.2 billion rose 23%, while adjusted earnings-per-share of $12.70, increased 20% from 2020. The company expects 2022 to be another year of strong growth. For 2022, AbbVie expects adjusted earnings-per-share in a range of $14.00 – $14.20, which would represent 11% growth at the midpoint.
AbbVie Is Still Modestly Priced
To be sure, the recent rise in AbbVie share price means the stock is not as cheap as it once was. But ABBV stock is still modestly valued. Based on expected EPS of $14.10 for this year, shares ended the quarter at a 2022 P/E ratio of 11.5. This is still quite a low valuation multiple for a company with AbbVie’s leading position in the healthcare industry.
However, even if AbbVie stock does not continue to see its valuation multiple increase, its earnings-per-share growth and dividends will provide satisfactory returns. We expect AbbVie to grow its earnings-per-share by 2%-3% per year. The stock also has a 3.5% current dividend yield, leading to total expected returns in the mid-single-digit range.
This is by no means an exceptional rate of return, but still qualifies AbbVie as a strong holding for dividend growth investors. On that point, the company continues to hike its dividend payout at a high rate. Last October, AbbVie increased its dividend by 9%. It has now increased its dividend for 50 consecutive years, going back to its days as a subsidiary of Abbott Laboratories (NYSE:ABT).
And, with a dividend payout ratio projected to be just 40% for 2022, there is plenty of room for ABBV stock to continue growing its dividend.
On the date of publication, Bob Ciura was LONG ABBV stock. He did not have (either directly or indirectly) any positions in the other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
