This Stock’s 4.7% Yield Looks Safe

You’re not supposed to get emotionally attached to stocks. They’re simply investment vehicles – ways for your money to work for you.

But I’ll always have a soft spot in my heart for AbbVie (NYSE: ABBV). Not only does it pay a great dividend, but it’s the stock with which I had my greatest trade. The options I recommended rose 2,381%, and one Oxford Club subscriber told me he made $1.3 million.

So you can understand why I’m fond of the stock.

But that was yesterday. Today, we’re focusing on AbbVie’s 4.7% yield and whether it can continue to pay shareholders the current dividend.

AbbVie is a large biopharma company with the bestselling drug in the world: Humira. AbbVie’s biotech cancer fighter Imbruvica generates $5 billion a year in revenue, and the company has several other blockbusters (drugs with $1 billion a year in sales).

Does all that revenue mean AbbVie can keep paying its dividend?

From a SafetyNet Pro perspective, AbbVie is nearly perfect.

In 2019, AbbVie’s free cash flow was $12.77 billion, a hair below the prior year’s $12.79 billion. SafetyNet Pro does not like to see free cash flow decline, no matter how small the infraction.

However, now that 2021 has begun, the one-year decline will age out when AbbVie reports full-year 2020 results, which are forecast to be $19.1 billion. This year’s total should be even higher.

Even with the slightly lower free cash flow total in 2019, AbbVie had more than enough to afford the $6.4 billion in dividends that it paid.

That figure is expected to have grown to $8.4 billion in 2020, which is just 44% of projected free cash flow. (Anything below 50% is considered quite safe.)

AbbVie was spun out of Abbott Laboratories (NYSE: ABT) in 2013. It has paid and raised its dividend every year since, so its dividend-paying history is short but solid.

AbbVie should have absolutely no problem paying and raising its dividend in 2021. And I expect it will be upgraded to SafetyNet Pro‘s highest rating in a few weeks once the 2020 results are in.

Dividend Safety Rating: B


Good investing,

— Marc

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Source: Wealthy Retirement