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| ABBV dividend history |
Today Abbvie Inc. (ABBV) announced it's holding the dividend steady for the fifth straight quarter. I have mixed feelings about this announcement. On one hand, there is room for an increase and I thought the dividend growth culture from the old Abbott (40 year streak prior to spinoff) would continue with both of its offspring. On the other hand, I've known from the beginning that ABBV wouldn't be a long term hold for me (These are spinoff shares, I did not buy them directly).
Here is a quote from my January 2013 recap:
2013 is off to a good start. Lorillard did a 3 for 1 stock split. ABT spun off ABBV. I'm pleased with the spinoff, as I'd rather just own the diversified health care portion. With the spinoff I'm free to sell my Abbvie shares when the time is right. I like what I see with the new ABT, it's kind of like a mini JNJ. Unfortunately the yield is very low right now, but I may pick up some shares in the future.
I dislike pure pharmaceutical stocks, especially ones with looming patent expirations that represent massive portions of earnings. That is exactly what the blockbuster drug Humira will be for ABBV in a few short years. Maybe Abbvie has a strong pipeline or can find innovative ways to ward off generic competition, but all that remains to be seen. Plus it's not like Humira sales will evaporate over night, I'd like to think it would be more of a slow decline. However, I have a hard time understanding the branded drug business and really and it's not my cup of tea. I can read about new drug breakthroughs all I want, but I'll never understand what it all means. I don't have expertise or any experience to draw from in this area. With that in mind, I much prefer medical device companies or diversified drug manufacturers such as JNJ or ABT.
Dividends
Here is what management said in the October conference call regarding dividends:
..the dividend is a very, very important piece of our investor identity. We have set the dividend in a very competitive payout ratio relative to our peers. And we've been pretty clear that we intend to grow that dividend over time probably more modestly in 2014, given some of the challenges with the lipid business but growing it nonetheless. And I think you can expect to see that payout ratio creep up as a result.
It is clear ABBV wants to reward shareholders with growing dividends, so why did they fail to actually raise it? You'd think management might want to do it with this announcement (one year in business) to coincide with the 5th payment in order to show investors they are serious. That is exactly what ABT did. My theory is Abbvie might be looking to grow dividends on the same schedule as the old ABT. The old Abbott announced increases during the month of February. Is that why Abbvie is holding out?
At this point I am leaning towards replacing my ABBV shares. As I stated many times the past year, I never thought Abbvie (or any pure pharma company) is suitable as a long term hold for me. Now the yield has fallen to 3%. Questions about dividend growth are even more concerning. Humira is set to lose patent protection in only a couple years, that is most concerning of all! I know I'm going to sell these shares eventually, should I do it now?
I don't want to pay capital gains tax which is a major reason not to sell. Look at this puppy:
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| ABBV is held in a taxable account. I don't want to realize this level of capital gains. |
Do you think Abbvie will raise dividends next quarter? Should I sell? Own any shares?
IMO hold it still next quarter. If no increase, then sell.
ReplyDeleteI'm thinking about selling it tomorrow, but will sleep on it and give it a bit more thought in the morning. Unfortunately I've already had to realize some capital gains this year, it would stink to have to increase my tax bill even more.
DeleteThanks for chiming in.
I sold shortly after spinoff. I didn't think both stocks were worth holding it. ABT lost the yield and ABBV became an unknown stock to me with no history so I was cautious to hold it. I thought I could get better deal elsewhere.
ReplyDeleteI know a lot of investors (blogs I follow) felt that way. It was a weird spinoff because the new company had a larger mkt cap than what was left of the old company. You could almost say ABBV spun off ABT. It was ugly looking at ABT's 1% yield most of this year, but in the end they made things right. Even if I decide to part ways with Abbvie, I will be watching to see what they end up doing. I will be especially interested to see how things pan out a few years down the road. I have no way of evaluating patent expirations or drug pipelines... like you say too many unknowns.
DeleteSell first day of the new year so you don't have to pay the tax for 16 months.
ReplyDeleteClearly that is the rational course of action. You are correct there. I chose to sell now because of other factors, I need a fresh start to the new year.
DeleteSorry to hear about this. First SNH, now ABBV! I'm glad I bought ABT after the split. Agree with the reasoning there - like a mini JNJ. I love diversification.
ReplyDeleteI've always been a little wary of pure pharma stocks, which is why I don't hold any. I think ABT has definitely shown they want to reward shareholders and are willing to follow through on that.
Best wishes with your decision!
ABT and JNJ both have pharmaceutical divisions, but that's why I like them. It's only a division. Look at all the other product offerings. ABT is at the top of my list for a new purchase. It's due for an increase in share count. At the very least I'll pick up some share through FRIP once I get that rolling.
DeleteThanks for stopping by!
If I were you, I'd keep it. It is a good company. But then if you have a philosophy of only owning companies that raise dividends consistently, better off sticking with Dividend champions and selling ABBV, staying true to what you believe in.
ReplyDeleteI indeed have that philosophy (for my stock holdings anyways) because I don't want to sell shares during retirement. Obviously bonds don't increases payments. Right now I do hold fixed income, but most of it held in my employer retirement account. I do not track that account on this blog.
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