Cathie Wood and Warren Buffett could be thought of as representing different ends of the investing spectrum. Wood has made her name betting on hyper-growth companies with an eye to the future. Meanwhile, Buffett is best known as a value-investing guru.
As such, it shouldn't come as much of a surprise that Wood's Ark Invest and Buffett's Berkshire Hathaway don't share too many holdings in common. There are some rare exceptions, however. Read on for a look at a healthcare-sector leader backed by Buffett and Wood that pays a substantial dividend and stands out as a worthwhile buy for investors seeking passive income.
Image source: Getty Images.
This pharma giant is broadening its horizon
AbbVie (ABBV -0.30%) is a pharmaceutical company with a current market capitalization of roughly $254 billion. The business is best-known for its Humira drug, which is a monoclonal antibody used to treat rheumatoid arthritis, ulcerative colitis, Crohn's disease, and a variety of other conditions. Humira has been the best-selling drug in the world for most of the last decade; it recorded roughly $17.3 billion in sales for AbbVie last year, and it's helped fuel stellar growth for the company.
Image source: AbbVie.
While Humira accounted for roughly 31% of the company's sales last year, AbbVie has been diversifying its portfolio in preparation for the rising competition from biosimilars and the eventual expiration of most of the patents on the drug in 2034.
Outside of Humira, the company's immunology segment is poised to benefit from ramping sales for its Skyrizi and Rinvoq drugs with expectations that combined sales will grow roughly 226% from 2021 to reach more than $15 billion in 2025. In addition to its core immunology business, the company has products in the hematologic oncology, neurology, and aesthetics categories.
The company also has a leading position in the eye-care segment, and it's aiming to continue building on its portfolio for the treatment of glaucoma and dry eye. In addition to these initiatives, the company is gearing up to launch its Vuity drug for the treatment of presbyopia, establish a strong position in the treatment of retinal diseases, and build a pipeline of novel new products to address other needs that are significantly unmet in the eye-care market.
Great for investors seeking passive income
Thanks to strong business performance, AbbVie has been able to boost its dividend at an impressive clip.
ABBV Dividend data by YCharts.
AbbVie has increased its dividend payout each year since its spinoff from Abbott Laboratories was completed in 2013, and the company has raised its payout more than 250% across that stretch. The stock already sports a chunky 4% dividend yield, but based on the pharma giant's payout growth history, there's a good chance investors will actually generate substantially more than the roughly $2,000 in passive income across a five-year stretch with a $10,000 initial investment at today's prices.
Based on the current yield, reinvesting your dividends would net you an extra 2.8 shares of AbbVie by next year if you bought $10,000 in stock today -- even if the company opted to break its payout growth streak. From there, those new shares added would also generate dividend payments, setting up a compounding effect. Combined with the potential for capital appreciation, rolling the dividend payments over to reinvest in the stock presents another way investors could wind up generating significantly more than $2,000 from AbbVie's dividend over the next five years.
