Building wealth for retirement is a lot easier when you own shares of companies that can keep growing for years and years without getting topped by rivals or otherwise swept away by the changing winds of the market. For example, mature businesses like AbbVie (ABBV 0.58%) are often especially favorable for retirement savings, due to their stable growth and demonstrated ability to prosper over time.
But slow and steady expansion won't make you a millionaire overnight. There's always a risk that your money will multiply much faster by investing in a company at the very start of its growth journey. Given that it might be necessary to hold shares and wait for years, could a stake in AbbVie be enough to grow your investment into millions?
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It's a stock that could play a role in many portfolios
As a leading global pharmaceutical company, AbbVie develops and commercializes drugs, and it owns the rights to a smorgasbord of moneymakers like Humira (the world's best-selling drug), Botox, and more. Selling those medicines generated annual revenue in excess of $56.1 billion in 2021, a more than 99% increase compared to five years prior. And more sales from newly launched products are always waiting in the wings. It has 19 programs in phase 3 clinical trials alone, with dozens more in earlier stages of development or in even later stages, currently awaiting regulatory approval.
The benefits of AbbVie's massive pipeline and constantly growing roster of medicines on the market are that investors can count on it to survive and grow over time while also paying out an ever-increasing quarterly dividend and pursuing share buybacks to pump up its stock price. AbbVie's forward dividend yield is presently just above 3.8%, which puts it firmly above the market's average yield of 1.5%. Furthermore, the company has a history of hiking its dividends, and in the last five years, its distribution grew by more than 120%, which is quite good. With plenty of cash flow to cover its dividend and ongoing reductions of its debt load of over $73.6 billion, it's reasonable to expect its payout to keep rising for the foreseeable future.
It's not for getting rich quickly
While dividends can be one part of the stock's ability to make you richer, they aren't going to be enough to make you a millionaire without the benefit of many years of compounding. At its present yield, you'd need to invest more than $2.6 million in AbbVie shares to get a yearly dividend income of $100,000, which isn't exactly an amount of income that screams "I'm a millionaire." And if you don't have that cash up front, you'll need to invest quite a hefty sum to reach millionaire status -- let's model it out quickly to see why.
Per management, the company's earnings per share (EPS) grew at a compound annual growth rate of 19% from 2013 through the end of 2021. If we assume it can grow its earnings at that rate in perpetuity, in 10 years, it'll report EPS of around $39.69. Given that it currently trades at a trailing-12-month price to earnings multiple of around 21.6, those earnings would put its stock price at around $857. At that price, people who invested around $175,000 today would have just over $1 million to show for it.
Of course, you could also invest a smaller amount into AbbVie and wait longer, once again assuming its earnings can actually continue to grow at the moderate pace they have been growing in recent years. Between the rising dividend payment, ongoing share buybacks, and earnings growth, it's entirely plausible that AbbVie stock could help investors turn their savings into millions by the time they retire.
Just don't get too impatient, as the road to wealth is likely to be long, and it's hard to imagine long periods of time passing without significant setbacks and unexpected trends in the market along the way.
