When it comes to planning for your financial future, it pays to pack your portfolio with stocks that can keep growing even if the market is falling. Though there's no shortcut to riches, with prudent investments, you can definitely get a lot closer than you might otherwise, provided that you have enough time to let your winners compound in value.
In this vein, drugmaker AbbVie (ABBV 0.82%) might be a strong contender for the part of your portfolio that's devoted to stable, stalwart stocks. Its roster of medicines is quite profitable, and it has a handful of other projects to pave the way for revenue growth in the future. Given the company's proven ability to develop drugs and get them approved, it has a lot to offer to shareholders -- but is it enough to make your net worth into millions of dollars over time?
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Owning this stock will probably make you richer
There are a few ways that buying and holding AbbVie's stock will bolster your portfolio's value in the long term.
First, it pays a quarterly dividend that currently yields about 4.54%. Provided that you reinvest the dividends, that means your holdings will grow each year even if the stock itself doesn't perform well. Between now and your retirement, the compounding of dividend reinvestment could make for a substantial amount of growth.
What's more, the company has raised its quarterly dividend payment each year for nearly 50 years in a row (counting its years spent as part of Abbott Laboratories, which it was spun off from in 2013). In 2019, the payout was raised by 10.3%, and in 2020 it was raised by 10.2%. Thus, investors who purchase the stock today can expect that management is devoted to making sure the dividend will continue to rise for the foreseeable future.
ABBV Dividend data by YCharts
Then there are the returns you could get from direct appreciation of AbbVie's stock price. While there are a lot of factors that can make a stock go up, in AbbVie's case you can look forward to catalysts like drugs advancing through the clinical trials process and getting regulatory approval for sale. Over the next few years, some of the most important catalysts will come from expanding the list of approved conditions for its drugs such as Rinvoq, which is currently approved to treat an inflammatory disease called ankylosing spondylitis.
The big test will be to see whether the company can keep its revenue growing even as sales of its moneymaker rheumatoid arthritis treatment Humira -- the world's top-selling drug -- start to ebb as biosimilars start to eat into its market share. Humira's patent protection in the E.U. lapsed in 2018, and its protections in the U.S. will end in 2023.
Biosimilars are already eroding Humira's market share in the E.U., but so far that has only caused revenue growth to start decelerating. As of the second quarter, revenue from Humira grew 7.1%, reaching $4.25 billion, so there's still a bit of time before the income will actually shrink.
It isn't about to make you millions on its own
As beneficial as buying AbbVie stock could be, don't expect it to make you rich.
As a mature pharmaceutical company with a market cap of more than $200 billion, it simply won't multiply your initial investment as rapidly as a smaller business that's growing quickly.
That doesn't mean it can't grow considerably over time, but there's no way for it to explode in value overnight in the way that young biotechs or software companies frequently do. Each of AbbVie's pipeline programs represents only a small slice of its potential future revenue, so each new milestone in clinical trials won't juice the stock very much.
And there's no guarantee that the stock will even beat the market's average. Over the past five years, the total return from shares of AbbVie lagged the market, though not by very much.
Especially considering the headwinds it'll face as income from Humira starts to taper over the next few years, it might be awhile before the stock outperforms. In other words, AbbVie could help you retire as a millionaire, but its contribution to that goal might not be significantly beyond that of an index fund if you're relatively close to retiring.
Nonetheless, there's nothing stopping you from getting wealthier by including AbbVie as a relatively conservative part of your diversified portfolio. And if you have a couple of decades before you plan to retire, you'll get a lot more mileage out of the company's annual dividend increases, assuming they continue.
So, while AbbVie isn't exactly a lottery ticket, it could definitely play a stable role in your long-term wealth-building strategy.
