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Is ABBV Stock a Solid Long-Term Investment?

Stock Market

In general, it's only natural that people always search for the best possible outcome, no matter what it is. For instance, people into health and fitness will scour the internet comparing the best foods and supplements. People searching for an economy car will search for a vehicle to serve them in the best possible way.The same can be said of investors. Most people tend to invest in things which will offer them the best return over the years. In other words, they are into generating life-time wealth. However, we're speaking of the market here, a place where certainty is non-existent and anyone claiming to have the formula for success is undoubtedly looking to pick your pockets clean with some scheme. That being said, there are ways to narrow the field when looking for a long-term stock. Here, we'll examine whether or not ABBV is a good choice for those looking for a long term investment. AbbVie's stock (ABBV) has been a top dividend performer for the last 50 years. With their strong and dependable cash flow, along with a high performance product line, ABBV has proven itself to be a good choice for those seeking a long-term investment. As a company, AbbVie is driven to provide cutting-edge medications that assist in patient care and recovery. AbbVie is known to keep one eye on the future of drugs and are constantly pushing themselves to meet the future head on in areas of virology, women's health, cancer medications, and more. Top shareholders of ABBV include: The Vanguard Group, Inc., BlackRock Inc., and State Street Corp.

What is an Investment?

Simply put, an investment is a thing which the investor hopes will increase in value over time, providing the investor with an additional source of income over the years.This 'thing' can be anything of value such as a baseball card, real estate or stock, among others. In other words, when an individual purchases a first edition book, the purpose is not to read it, but keep it in pristine condition so it continues to increase in value over the long term. In fact, when a toy collector purchases a toy, they never even open the package. The toy is never played with, so it will remain in perfect condition, thus retaining its original value. Collectibles like baseball cards, toys and real estate all well and good, but what about stocks? When an investor purchases a stock with the purpose of keeping over the years, it's known as a long-term investment. Long-term investors intend to ride the wave of the stock markets ups and downs, never selling their long-term stock. Instead, they keep it in hopes that it will increase in value over time.

What is the Difference Between a Long and Short-Term Investment?

If you're new to the world of investing, know that there is a difference between long and short-term stock investments. A long-term investment refers to one where the investor chooses to hold a stock for a long period of time in order to generate cash income in the form of dividends. A short-term stock, on the other hand, is one which is purchased with the sole intention of selling for cash within a short time, such as 3 months to a year. CD's and Money Markets are examples of short-term investments as are Treasury bills. Long-term investments are those investments which will be held over time, and not sold in the short term, or never be sold. When you elect to choose to add long-term investments to your stock portfolio, you are (or should be) aware that there is risk involved. After all, no one knows how the market will act tomorrow. So even if things aren't too rosy, you still choose to hold onto that investment, hoping to gain a higher yield in the future. As you can see, having long-term investments takes quite a bit of nerve at times along with will power to not sell at the first hint of unfavorable market activity. In general, people prefer predictability over the unknown, and it's ABBV's predictability based on past performance, which makes it an ideal choice for those looking for a solid, long-term stock investment.

AbbVie: The House That Humira Built

AbbVie is the name of the company, and ABBV refers to its stock as seen on the NYSE. To put it simply, AbbVie is an extremely successful company that deals in the biopharmaceutical business. As a drug company, AbbVie concentrates on the following sectors: Neuroscience, hematologic oncology and immunology. What initially made AbbVie such a huge success was their drug Adalimumab. Sold under the trade name of Humira, Humira performs as a tumor necrosis factor blocker. In other words, it helps to reduce inflammation. The drug has proven itself useful for those suffering from rheumatoid arthritis, plaque psoriasis, Crohn's disease, ulcerative colitis, and more. ABBV has since made great strides in productivity. Whereas AbbVie could once be considered the house the Humira built, due to efficient management AbbVie has developed other medications such as Rinvoq and Skyizi, so it no longer needs to depend solely on profits generated from Humira. In short, their stock ABBV came out strong, and remained so due to careful management practices and product development. As a result, AbbVie gained its strength from Humira. Additions to its product line proceeded to lead to a diversified income stream for AbbVie With their recently expanded portfolio, Humira takes up just 35 percent of total profits. All of this translates into a company with a more than adequate cash flow for long-term investors.

ABBV Has Remained a Dividend King for Years

When an investor gets a dividend, that means that they are receiving a piece of the company's profits. One huge clue for new investors regarding ABBV's long-term investment status is its past performance. You see, ABBV has been a dividend aristocrat then a dividend king for years now. If you're not familiar with the terms, a dividend aristocrat refers to companies on the S&P's 500 index which has paid out solid dividends to investors for 25 straight years in a row, Whereas a dividend king has been paying out dividends for 50 straight years in a row. Also, the dividends must increase from year to year. As you can see, past performance is an acceptable indicator of ABBV's future performance. To summarize, ABBV, along with PepsiCo, Kimberly-Clark and Abbott Labs are listed as a dividend arisocrats and/or kings according to the S&P's 500 list. If you look to the far right column, you'll see that ABBV has been performing as such for 50 years. Thus, as a dividend king ABBV is recognized as a stable company which provides a steady income to its investors as well as being known as a company with more than adequate financial foundation.

ABBV Acquires Allergan: Maker of Botox

Just hearing the news that ABBV acquired the maker of the medical aesthetic drug Botox should send chils down any long-term investors spine. After all, Botox can be considered a sort of sacred cash cow. As a drug designed to lessen skin wrinkles, for many it's the fountain of youth. Like it or not, we reside in a world that values outward appearance. Even men line up for Botox as it helps their career by making them appear youthful, vibrant and full of vitality. So it's no wonder that by acquiring Allergan in 2020, AbbVie's diversification automatically increased, leading to new opportunities in the field of medical aesthetic drugs. However, Botox isn't the only drug created by the Irish firm. Allergan provides AbbVie with a new revenue gains from their stable of meds including Vraylar, Ubrelvy, and Juvederm, among others. In a statement made by AbbVie, “This diversified on-market portfolio will drive the existing AbbVie growth platform (ex-Humira) to approximately $30 billion in revenues in full year 2020, with combined revenues of approximately $50 billion. It also positions the company for enhanced long-term growth potential, a growing dividend and investment in innovation in each of its therapeutic categories. According to Richard A. Gonzalez, AbbVie CEO, "The new AbbVie will be a well-diversified leader in many important therapeutic categories, with both on-market and pipeline assets, and our financial strength will allow us to continue to invest in innovative science and continue to serve unmet medical needs of patients that rely upon us. I am proud of both organizations and look forward to the opportunities ahead."

ABBV is Listed as a S.A.F.E. Dividend Stock

Let's face it, you're looking to invest in the best possible stock which will have the least risk involved while providing you with a solid return. In the end, it's all about the dividend, so it's good to know that the Dividend Channel recently added ABBV to its S.A.F.E. list. S.A.F.E. refers to Safe, Accelerating, Flawless, and Enduring. This means that the Dividend Channel has found that ABBV is a stock which performs with a steady 3.8 percent yield. This, along with ABBVs history of above average dividend performance and being listed on the S&P's 500 list as a dividend king for 50 years, is another factor which makes ABBV a top stock to invest in for long term investors. In short, the only way a stock can be listed as a S.A.F.E. stock is to have the following qualities:

  • S - Solid Return
  • A - Accelerating Amount
  • F - Flawless History
  • E - Enduring

Motley Fool's Take

The Motley Fool is one of the most respected financial news pages on the internet. So it's only natural that we find out just what the Motley Fool thinks of ABBV in general, and as a solid, long-term investment. What sticks out the most here are the solid and steady dividend increases ABBV has provided over time. In other words, ABBV isn't a one hit wonder. No indeed, as over the years its growth has identified it as a stock to buy and hold as the years wear on. That's why when asked, several Motley Fool contributors named three stocks, ABBV, AMGN, and Pfizer, as stocks they'd purchase without hesitation. According to Motley Fool contributor, Keith Speights, ABBV remains a top choice for a variety of reasons. First, ABBV has proven itself by becoming a Dividend King, holding onto its reign as a top dividend provider for 50 years. While AbbVie became its own entity when it left Abbot Labs in 2013, the company actually has a history that spans almost 130 years. This and the companies cash flow help to make it a good choice for long term investors. According to an article written by Cappuccino Finance, the foundation for their strong profit margin is their diversified portfolio, which holds products that generate their strong cash flow. In fact, the article states that AbbVie's experienced a solid revenyue increase from $7 billion in 2016 to $22.7 billion in 2021. With a gross profit margin of 69 percent, a net income margin of 20.54 percent and EBIT (Earnings Before Interest and Taxes) margin of 34.75 percent, AbbVie continues to experience excellent cash generation from their products. Finally, there's AbbVie's strong portfolio. Though they made their mark with the drug Humira, they've since continued to increase the number of high performing and in demand medications in its portfolio. These added products help strengthen the portfolio if and when their star, Humira, begins to lag. When you consider the fact that their newer additions, Skyrizi and Rinvoq will help to bring at least $15 billion into the coffer in the next few years. Keith closes his argument by stating that ABBV has continued to provide a 17 percent gain.

Final Thoughts

As always, please invest wisely. There is nothing certain when it comes to investing. This article contains forward-looking assessments only. These statements are based solely on the past performance of ABBV in a competitive market, its current performance, and so on. As such, consider the future uncertain so undertake this or any other investments with the knowledge that no matter how good an investment looks today, the risk is that it could change drastically tomorrow is a reality. In short, AbbVie's strength comes from its year to year, long term results and considerable dividends.

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Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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