What are the top three things you like in a stock? For me, the answer is pretty easy: I like growth most of all. Everyone wants their stocks to appreciate in value.
Second, I like dividends. The total return of a given stock includes both share-price appreciation and dividend reinvestment. When you have both, it's a wonderful thing. Finally, like most investors, I like getting a bargain.
The problem is that all three of these attributes can be hard to find in one stock. But it's not an impossible task. There's at least one alternative on the market that is a growth stock, a dividend stock, and a value stock all rolled into one. If I could buy only one stock right now, AbbVie (NYSE:ABBV) would be it.
We can only look back over the past five years to see how well AbbVie stock has performed. That's because the biotech wasn't traded as an independent entity until 2013, after being spun off from parent Abbott Labs (NYSE:ABT). But during those five years, AbbVie stock has nearly doubled the gains posted by the S&P 500 Index.
Can AbbVie continue its winning ways? I think so. The company appears to be poised for strong earnings growth. Wall Street analysts, for example, project that AbbVie will increase its earnings by more than 14% annually over the next five years.
AbbVie should be able to achieve this level of growth thanks, in large part, to its solid current product lineup. Humira, the top-selling drug in the world, continues to generate impressive sales growth. Worries that AbbVie could face major competition in the U.S. have been largely alleviated after the company struck a deal recently with Amgen. Under the terms of the deal, Amjevita, Amgen's biosimilar to Humira, won't be marketed in the U.S. until early 2023. In addition, AbbVie will get royalties on all sales of Amjevita.
Cancer drug Imbruvica is also gaining momentum. In the third quarter, AbbVie reported sales for the drug totaling $626 million, a 42.5% year-over-year increase. Imbruvica is on track to generate more than $2.3 billion in revenue this year. Market research firm EvaluatePharma projects the drug will rake in $7.5 billion by 2022. However, AbbVie will split this revenue with its partner, Johnson & Johnson (NYSE:JNJ).
The company has a couple of promising newer products that have already won approval. The U.S. Food and Drug Administration (FDA) gave a thumbs-up in April for Venclexta in treating patients with chronic lymphocytic leukemia (CLL) who have a chromosomal abnormality called 17p deletion.
AbbVie and Roche are also evaluating Venclexta in clinical studies for several other indications. The FDA approved hepatitis C virus (HCV) drug Mavyret in August. Both drugs could become blockbusters.
AbbVie's pipeline also looks great. In the autoimmune-disease therapeutic category, upadacitinib and risankizumab are two promising late-stage assets. Turning to oncology, AbbVie has Rova-T and veliparib. Elagolix could be another potential blockbuster in treating endometriosis and uterine fibroids.
There aren't many healthcare stocks with more attractive dividends than AbbVie. Its dividend yield currently stands at 3.09%. And that's lower than it's been for most of the last few years, because AbbVie stock has performed so well.
Because of its connection with Abbott Labs, AbbVie boasts an impressive track record of increasing its dividend for 45 consecutive years. That includes growing its dividend by nearly 90% over the last five years, even faster than its parent company has increased its dividend.
AbbVie just announced its latest dividend hike a few days ago. The company appears to be in solid shape to keep the dividend increases coming. AbbVie uses less than 60% of earnings to fund the dividend program. And both earnings and cash flow continue to grow.
You may think that AbbVie, with its excellent growth prospects and mouth-watering dividend, might be priced for perfection. It's not.
The stock currently trades at less than 14 times expected earnings. That's less expensive than several peers with lower growth opportunities and dividend yields. Johnson & Johnson stock, for example, trades at nearly 18 times expected earnings, but Wall Street projects annual earnings growth of around 7%. J&J's dividend yield of 2.37% is also well below AbbVie's.
AbbVie isn't without some risks. Humira will face biosimilar competition in Europe beginning in 2018. There's always the possibility that one or more of the company's pipeline candidates could flop.
I'm not too concerned, though. Two-thirds of Humira's sales are made in the U.S. Johnson & Johnson's experience with biosimilar threats to its blockbuster autoimmune-disease drug Remicade hasn't been overly negative so far.
AbbVie probably won't have an immediate revenue cliff when biosimilars to Humira hit the market, either. Although the pipeline risk is real, AbbVie appears to have several solid candidates that should be able to advance to approval.
There's no such thing as a perfect stock. But for investors who, like me, seek growth, dividends, and value, AbbVie checks off the boxes really well.