Welcome to this series where I will be reviewing all the Dividend Kings and providing an overview and valuation calculation on the companies. Dividend Kings are a rare breed of Dividend Growth Companies. These companies have managed to raise their dividend for 50 or more years consecutively. Through all types of market swings, economic trouble, wars, recessions, these companies have seen it all and continue to reward shareholders with rising dividend income.
This week’s entry will focus on:
ABT – Abbott Laboratories
Overview
Abbott Laboratories, together with its subsidiaries, discovers, develops, manufactures, and sells health care products worldwide.
It operates in four segments:
- Established Pharmaceutical Products
- Diagnostic Products
- Nutritional Products
- Medical Devices
ABT specializes in Glucose Monitoring, Blood and Plasma Screening, Adult Nutrition, Pediatric Nutrition, Heart Pumps, Remote Heart Failure Monitoring, Point of Care Testing, and Chronic Pain Devices.
Some of their well-known brands include: Similac, PediaSure, PediaLyte, Ensure, and FreeStyle.
Abbott Laboratories was founded in 1888 and is based in North Chicago, Illinois. The company operates in over 130 countries.
(Source: https://www.abbott.com/about-abbott/at-a-glance.html)
Metrics:
Current Price: $118.58 (4/1/22)
Dividend Amount: $1.88
Dividend Yield: 1.73%
5 Year Dividend CAGR: 11.74%
Dividend Payout Ratio: 47.59%
Years of Dividend Increases: 50 Years
EPS: $5.14
P/E: 23.03
Analyst 5 Year Earnings Growth Estimate: 12.12%
Valuation:
DCF (10% RRR): $140.69
P/E Mean Reversion:$127.88
Dividend Yield Theory: $117.50
Average of the three: $128.69
Analyst 1 year Price Target: $142.88
Commentary:
ABT is a well established leader in the healthcare products industry. Their broad diversification across the healthcare industry has allowed the company to continue to grow their revenue and net income consistently. This stability has also allowed the company to grow their dividend for 50 years and increase at a high rate.
Long term shareholders have benefited from this growth as well. The stock price is up 167% in the past 5 years. Even longer term shareholders would have also received shares in their spin-off, Abbvie, in 2012, which has been a great investment, rising 363% since the split (and pays a great dividend).
ABT has benefited from the pandemic through their CoVID testing kits, which are under the BinaxNOW brand. I know my family has bought many of these over the past year and many other people as well. The pandemic slowed down the company’s medical devices business in 2020 but they are seeing a resurgence in that line of business as well now, with medical devices sales up 19.4% in 2021.
The company stated in a recent investor presentation that their worldwide sales were $43.1B in 2021, a 22% increase and each of their major business lines had revenue increases that year.
ABT’s dividend is considered safe, with Simply Safe Dividends giving it a 71 out of 99 rating, a moderate payout ratio of 47.59%, and sales and income growth to support the continuation of the dividend growth rates that the company has been able to achieve.
This is a solid company in a growing industry. The current dividend yield is low but the combined current dividend plus the expected growth rate provides a quality choice for dividend investors with a long timeframe.
Disclosure: I own shares of ABT.