|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.
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:
|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?