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 motive. 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 greatest 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 possibly can obtain the total record, together with vital monetary metrics comparable to dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:

 

Disclaimer: Certain Dividend isn’t affiliated with S&P World in any means. S&P World owns and maintains The Dividend Aristocrats Index. The knowledge on this article and downloadable spreadsheet relies on Certain 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 data on this article or spreadsheet is official knowledge from S&P World. Seek the advice of S&P World for official data.

Abbott is diversified throughout a number of areas of well being care, every of which has optimistic 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 major segments: Dietary Merchandise, Established Prescription drugs, Diagnostics, and Medical Units. Abbott enjoys a management place throughout product segments.

The corporate’s Diet Merchandise phase is the #1 pediatric diet supplier in the USA and another geographies. Furthermore, the phase’s efficiency has improved significantly in recent times because the working margin has improved each yr since 2011.

Abbott Laboratories’ final phase is the Medical Units unit. This phase was considerably bolstered in current instances 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% improve in comparison with the fourth quarter of 2022. Adjusted earnings-per-share of $1.19 in comparison with $1.03 within the prior yr.

Income was $50 million greater than anticipated whereas adjusted earnings-per-share have been in-line with estimates. For the yr, 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 steering.

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 method 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 into more and more extra worthwhile through the years to return.

The primary is the getting older 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 anticipated to succeed in 16% in 2050.

The second broad tailwind that may profit Abbott Laboratories is the corporate’s deal with rising markets. That is significantly true for its Branded Generic Prescription drugs phase.

Lots of the nations that this phase is concentrated on are spending a really small proportion of their general GDP on healthcare, a fee that’s anticipated to extend sooner or later.

The getting older home inhabitants mixed with the fairly low deal with healthcare spending in rising market nations ought to depart Abbott Laboratories loads of room to develop for the foreseeable future.

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

Aggressive Benefits & Recession Efficiency

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

The second part of Abbott’s aggressive benefit is its deal with analysis and improvement. Its funding in analysis & improvement reveals that the corporate is prepared to play the lengthy recreation, constructing out its product pipeline and bettering its long-term enterprise development prospects.

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

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

Remarkably, Abbott Laboratories managed to develop its earnings-per-share through the international monetary disaster – one of the vital economically troublesome time intervals on report. On the identical time, the corporate’s share rely 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 surroundings.

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 Complete Returns

Abbott Laboratories is presently buying and selling at ~$113 per share. Utilizing the midpoint of the corporate’s steering for the yr offers the inventory a price-to-earnings ratio of 24.6.

Abbott Laboratories’ price-to-earnings ratio has usually 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} honest price-to-earnings ratio of 20 is extra acceptable within the present surroundings. If shares revert to our honest 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 complete returns would be the firm’s earnings-per-share development. We anticipate that this development is more likely to proceed, and buyers can fairly anticipate 7% in annual adjusted earnings-per-share development shifting ahead.

Lastly, Abbott’s complete 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 complete returns might be composed of:

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

Complete anticipated annual returns are forecasted at simply 4.9% by 2029. It is a pretty low anticipated fee of return as a result of overvaluation of the inventory at the moment.

Remaining Ideas

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

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

If you’re excited by discovering high-quality dividend development shares appropriate for long-term funding, the next Certain Dividend databases might be helpful:

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