Saturday, October 25, 2008

New Dividend Stock Buy: Abbott Labs (ABT)

I recently purchased shares of Abbott Labs (ABT). I believe the stock is a great long term holding with a stable balance sheet, a history of dividend growth and a strong pipeline for future growth. I wish the stock would have drop more in price with the recent market downturn but it is such a solid company the stock is only down about 5% for the year.

Company Description

Abbott is a global, broad-based health care company that develops, manufactures and markets pharmaceuticals and medical products, including nutritionals, devices and diagnostics. During 2007, pharmaceuticals accounted for 57% of operating revenues, while nutritionals represented
17%, diagnostics contributed 12%, and vascular represented 6%. Sales of other products represented 8%of 2007 sales. The company employs more than 68,000 people and markets its products in more than 130 countries. The company is headquartered in north suburban Chicago.

Healthy Growth

The company recently posted strong results for the third quarter. Earnings per share of 79 cents surpassed the year-prior 67 cents and exceeded the consensus estimate by 3%. Worldwide sales jumped 17.6% on a year-over-year basis.

All of Abbott's businesses are performing exceptionally well, ahead of expectations,' said Miles D. White, chairman and chief executive officer, Abbott. 'Abbott remains well-positioned, with strong core growth franchises, including our emerging vascular business, which is rapidly becoming a significant contributor to Abbott's growth.'

ABT should increase sales at a high double-digit percentage rate over the next several years. EPS growth has been forcasted at 13% through 2010. EPS growth includes expected margin improvement, lower debt levels, a successful U.S. launch of a new drug-coated coronary stent and continued strength in sales of Humira.

Higher Estimates

The company hiked its full-year guidance 2008, and analysts followed suit. ABT increased its guidance to an adjusted earnings per share range of $3.31 - $3.33 from $3.24 - $3.28. All 10 covering analysts responded by issuing full-year forecasts of $3.32 per share, up from last week's $3.27.

Strong Dividend Income

In September, the company declared a quarterly dividend of 36 cents per share, this was the 339th consecutive quarterly dividend paid out by Abbott since 1924. ABT said the payable November 15, 2008, to shareholders of record at the close of business on October 15, 2008.

The dividend translates into a yield of 2.6%, which stands high above the yields offered by its peers as most companies within ABT's industry group offer no dividend.

Abbott stated that it increased its dividend payout for 36 consecutive years, which included a 10.8% increase earlier this year. Also, since the debut of the S&P 500 in 1957, Abbott explained that it has had the second-highest average annual return of all originally listed companies, in part because of its dividend yield.

Disclosure: The Div Guy owns shares of ABT at the time of this post.

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1 comment:

  1. Sounds like a great buy Div Guy!

    I remember when I looked at ABT back in early 2006 that they had one of the most stellar dividend histories in their group, but it was the valuation that had concerned me. Maybe its time to re-examine in light of recent market events to see if this stock is now a buy on my criteria as well.


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