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Could an Investment in AbbVie Give You $10,000 in Annual Dividend Income by Retirement?

By David Jagielski – Nov 23, 2022 at 11:30AM

Key Points

  • AbbVie has an impressive track record for increasing its dividend payments.
  • This year, it hiked its payouts by 5%, and its dividend is now more than double what the company was paying five years ago.

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This is a stock that rewards long-term investors through continual dividend increases.

An easy way to boost your income is through dividend stocks. Since they pay a percentage of your investment back to you every quarter, you're collecting cash on a regular basis, and you don't have to sell your investment, either. If you invest in dividend growth stocks, you can even see your income rise over the years as the company increases its payouts.

A good example of a top dividend growth stock is healthcare company AbbVie (ABBV 1.26%). The drugmaker behind the popular arthritis medication Humira has an excellent track record for paying and increasing dividends, and below I'll show you how much you would likely need to invest in the stock today to get your annual dividend income up to $10,000 by retirement.

AbbVie is an elite dividend growth stock

AbbVie's dividend yield is 3.8%, which is a full 2 percentage points higher than the S&P 500 average of 1.7%. But the real benefit you'll get from investing in the stock is from buying and holding. That's because AbbVie is also a Dividend King, meaning it has been increasing its dividend annually for more than 50 straight years (this includes when it was still part of Abbott Laboratories).

Last month, AbbVie announced a 5% increase to its quarterly dividend, paying shareholders $1.48 per share as of February 2023. That's more than double the $0.71 the company was paying at the start of 2018. That averages out to a compound annual growth rate of nearly 16%.

That high growth rate isn't sustainable, however, as is implied with AbbVie's most recent rate hike being a more modest 5%.

Here's how dividend income from AbbVie's stock could grow to $10,000

If you were to hang on to AbbVie's stock and the company were to continue to raise its dividend payments by 5%, it could take 14 or more years for the payout to double.

Obviously, this makes a big assumption that every year the dividend rises by precisely 5%, which might not be all that likely. With the company continuing to grow and expand its business, there could be a mix of high and low dividend increases along the way. There's also the risk that the dividend increases could stop entirely. Although that seems unlikely today, it's important to remember that these payments are never guaranteed.

But if the company were to increase the dividend by 5% per year (on average), this is how much you would need to invest today to get to $10,000 in annual dividend income by retirement:

Chart by author.

This is based on the assumption that you buy the stock for $158, which is around what it was trading for on Monday. As is always the case, the earlier you invest and the more investing years you have left before retirement, the less money you would need to invest today. The lowest investment amount, $48,385, would require 35 investing years to retirement for this strategy to be successful. Here's how dividend income from that investment would grow over the years:

Chart by author.

Unless you have a large portfolio where you can justify putting more than $48,000 into a single stock, investing in just AbbVie might not be suitable for this strategy. Instead, you might want to spread that total investment amount across multiple dividend stocks with yields and track records similar to AbbVie's.

A great stock to own for the long term

AbbVie is a growing business that is rewarding its shareholders as it expands, and that gives investors plenty of incentive to remain invested for not just years but decades. And today, it trades at just 14 times its future profits -- the healthcare industry average is nearly 17. Overall, AbbVie is a top healthcare stock that can be a pillar of your portfolio for years.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

AbbVie Stock Quote
AbbVie
ABBV
$163.66 (1.26%) $2.03
Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$108.09 (0.15%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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