Should AbbVie Inc. have a place in your dividend portfolio?
You want to sink your money into a stock without the fuss. You want the kind of stocks that would have been the equivalent of investing your money in Michael Jordan in the 90s, if that had been possible.
AbbVie Inc. (NYSE: ABBV) is a research-based biopharmaceutical company that grew as a subsidiary of Abbott Laboratories in 2013. Its hyper-popular drug, Humira, an injection for Behçet’s autoimmune and intestinal diseases, has flowed billions directly to the bank. But what happens when the generic rivals come knocking on your door? From 2023, the competition will beat AbbVie Inc., so it relies on Rinvoq and Skyrizi to boost its results.
Let’s take a look at what you need to know about AbbVie Inc. and the pros and cons of investing in the company. If you are looking for dividends, AbbVie Inc. can offer you great opportunities.
About AbbVie Inc.
AbbVie Inc. develops and sells pharmaceutical products worldwide, including these household names that treat the following conditions:
- HUMIRA — autoimmune and intestinal Behçet’s diseases
- SKYRIZ — psoriasis
- RINVOQ — rheumatoid arthritis
- IMBRUVICA and VENCLEXTA — chronic lymphocytic leukemia and small lymphocytic lymphoma
- MAVYRET — chronic HCV genotype 1 to 6 infection
- CREON — pancreatic enzyme therapy
- Synthroid — hypothyroidism
- Linzess/Constella — irritable bowel syndrome
- Lupron – advanced prostate cancer, endometriosis and central precocious puberty and anemia caused by uterine fibroids
- ORILISSA – moderate to severe endometriosis pain
- Duopa and Duodopa — Parkinson’s disease
- Lumigan/Ganfort – reduction of elevated intraocular pressure (IOP) in patients with open angle glaucoma (OAG) or ocular hypertension
- Ubrelvy — migraine
- Restase – tear production
The company reported net revenue of $14.583 billion in the second quarter of 2022, an increase of 4.5% on a reported basis and 6.1% operationally. Immunology portfolio net revenue was $7.207 billion, an increase of 17.8% on a reported basis or 19.2% on an operating basis.
Humira’s US net revenues were $4.664 billion, an increase of 9.6%. Internationally, Humira’s net revenues were $699 million, down 13.8% on a reported basis or 7.3% on an operating basis.
Ultimately, revenue fell short and EPS rose to $3.37 (up 11%). AbbVie Inc.’s hematology oncology drug sales fell 9% due to Imbruvica’s loss of market share to competitors. The company is sticking to its full-year outlook for adjusted diluted earnings per share between $13.78 and $13.98.
Advantages and disadvantages of investing in AbbVie Inc.
There are plenty of reasons to love AbbVie Inc., but if you’ve been wary of any negative stock market movement, you might want to consider the downsides of investing in AbbVie Inc.
Let’s first look at some of the benefits of investing in AbbVie Inc.:
- Dividend yield: If a company pays out more dividends than it earns, it may not be able to pay its future dividend payments to investors. The company has a dividend payout ratio of 79.89% of earnings, indicating that it pays out the majority of its earnings. However, it is important to consider whether AbbVie Inc. can generate enough free cash flow to pay its dividend. It distributed 42% of its free cash flow as dividends, a comfortable payout percentage. Additionally, AbbVie Inc. has increased its dividend for 50 consecutive years, with a strong history of dividend growth.
- Exposure to the Marijuana Industry: The thriving marijuana industry deserves a second and third look due to the fact that the industry itself is in its infancy with great potential. AbbVie Inc. has successfully propagated marijuana-based drugs, including Marinol, which helps relieve nausea during chemotherapy treatments and restore appetite during AIDS treatments. Society is unlikely to be negatively affected by the recreational marijuana debate due to its focus on medical cannabis.
- Composition of the big league: Humira isn’t the only lion in the AbbVie Inc lineup. AbbVie Inc. has about 16 drugs in its coffers, including some unfamiliar names, such as those for prostate cancer, testosterone boosters, and those that help to pancreatic therapy.
What are the disadvantages ? It’s equally important to weigh them when considering your investment options. One of the biggest drawbacks is the competition in the biopharmaceutical field. Let’s take a look:
- Competition: Next January, Humira’s first rival will be officially launched in the United States, which marks the end of about 20 years of success and a profit of almost 200 billion dollars. Cheaper versions have already appeared, especially in India and Europe. Not surprisingly, biosimilars are expected to put AbbVie Inc. under intense pressure. However, the company knows what is coming, so it has done everything it can to reduce its reliance on the drug.
- Stock market future in trouble: It’s not a question of past history, it’s a question of now and in a few months. Stocks may struggle to gain traction due to the competition already mentioned. Investors may want to consider investing cautiously at this time and toe the line until the January 2023 headwinds come and go.
Should AbbVie Inc. be a dividend player in your portfolio?
There is no doubt that Humira’s biosimilars are a huge threat, potentially bringing the company into a loop. However, it should be acknowledged that AbbVie Inc. anticipated these changes.
It will be worth watching AbbVie Inc.’s progress on continued sales of Rinvoq (upadacitinib) and Skyrizi (risankizumab). The company confirmed revenue forecasts of over $15 billion for both drugs by 2025 – to be exact, the company expects risk-adjusted sales of over $7.5 billion for Rinvoq and over $7.5 billion for Skyrizi. However, is the company putting too many eggs in one basket? It is worth considering before investing.
Additionally, before investing based on potential events in 2025, it’s important to assess your investment goals and timeline to determine if the Chicago-based company is worthy of a place in your portfolio. It’s a good idea to make sure you’re investing as part of a diversified portfolio. check your other investments to get an idea of how they fit into your overall strategy.