Top Dividend Stocks: Leading Biotech AbbVie Hikes Payout

IBD’s Income Investor column highlights top dividend stocks. With a long track record of dividend increases, AbbVie (ABBV) is in focus, generating a strong yield with stable fundamentals.

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Biopharma blue chip AbbVie was launched in 2013 as a spinoff from Abbott Laboratories (ABT). Humira, the firm’s best-known and most profitable drug, is used to treat rheumatoid arthritis. It contributed a whopping 40% to total revenue in 2021.

Top Dividend Stocks: AbbVie Hikes Payout 5%

As a member of the S&P 500 dividend aristocrat index, dividend growth has been a staple for AbbVie. So, it’s no surprise this top dividend stock announced a 5% increase for 2023, bringing the quarterly payout to $1.48 per share, payable to shareholders of record on Jan. 13. However, this marks the smallest increase in three years, after 10.2% in 2021 and 8.5% in 2022.

At current prices, the new dividend yields 3.74%, well above the 1.6% average of S&P 500 stocks.

AbbVie has shown strong results and solid financials that support further dividend increases. S&P has AbbVie’s debt rated at (BBB+) and, earlier this month, raised its outlook to “positive” from “stable.”

The principal concern: AbbVie’s heavy reliance on Humira, which is now patent-free. Humira sales missed Q3 expectations, growing just 2.5% to $5.56 billion.

The real test comes next year when generics come to market in the United States.

Headwinds are notable but, as third-quarter results show, other AbbVie drugs are hitting the mark. Skyrizi, a Crohn’s disease treatment, is most notable. The compound booked a 75% year-over-year jump in revenue to $1.39 billion, aided by a recommendation from the European Medicines Agency.

Humira competition will likely hit AbbVie’s growth in the short term. But solid fundamentals and strong results in other segments make AbbVie an interesting play, best suited to income-seeking investors. These types of investments are especially hard to find in the biotech industry.

AbbVie currently ranks second in IBD’s Medical and Ethical Drugs group, boasting strong Composite and EPS ratings.

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