New Trade for December 11th, 2020

Markets are under pressure.  The three benchmarks are tracking to snap multi week winning streaks.  However, heading into the opening bell, The Dow and the S&P were less than 1% away from their record high closes, and the Nasdaq was 1.4% away from its record close from earlier this week.  

Our trade for today highlights a large cap pharma company that has raised its dividend for 48 consecutive years, and it’s currently a value.  If history repeats itself, this company could be a slam dunk for future hit drugs.   

AbbVie (ABBV) should be very familiar to long-term dividend investors.  That’s because the pharmaceutical company is a Dividend Aristocrat, by virtue of having raised its dividend for 48 consecutive years.  

Even better, its current dividend yield is one of the highest in the S&P 500, and the company has raised the payout 20% rate over the past five years.  That includes a double-digit increase this year.  

AbbVie is best known for hit drugs such as Humira and Imbruvica, which account for about 55% of ABBV’s 2020 sales.  But UBS, which calls the stock a Buy, says the market is underappreciating the potential of Rinvoq and Skyrizi, which treat rheumatoid arthritis and plaque psoriasis, respectively.  

“If ABBV is able to recreate its success in current indications to future indications, then Rinvoq plus Skyrizi alone will replace Humira completely with about $20 billion in sales,” UBS says.  

Despite some risk from drug-price reform, most analysts remain optimistic about ABBV.  Of the 18 analysts covering the stock, 12 call it a Strong Buy, 1 says Buy and 5 rate it at Hold.  

Considering the high dividend yield, the long-term growth forecast of almost 5% and the fact that shares trade at only ~ 9.64 times expected earnings, AbbVie looks like a slam-dunk value stock.