Abbott Laboratories (ABT -0.59%) has generally been a good investment to hold over the years. Its business is diverse. And the company not only pays a dividend but also has a terrific track record of increasing its payouts for 50-plus years. But last year was a tough one for the company as, in addition to unfavorable foreign exchange rates, manufacturing problems (e.g., contamination issues) with its baby formula products led to declines in Abbott's top line. And according to The Wall Street Journal, a criminal investigation is ongoing that relates to last year's recalls.

Is Abbott a bad-news buy that could turn things around in 2023, or has this once-safe healthcare stock become too risky of an investment to be holding right now?

The company's sales grew by just over 1% last year

Last month, Abbott reported its fourth-quarter and year-end results for 2022. And for the full year, revenue of $43.7 billion rose by just 1.3% from the previous year. There wasn't a lot of growth to show for, as its medical device business reported just 2.2% revenue growth. It was weighed down by foreign exchange as its growth rate jumps to 8.1% organically when factoring out the impact of currency.

Meanwhile, Abbott's diagnostics revenue for the year rose by 6%, which is impressive when you consider that during the last three months of 2022 it declined by more than 26% due to a drop in COVID-19 testing. Overall, it wasn't an impressive year for Abbott by any stretch.

Where is the growth going to come from?

The challenge I see right now is determining where the growth will come from for Abbott. Sales from its nutrition business fell 10% last year. And with contamination issues last year leading to a recall of baby formula products, Abbott may have a hard time winning over customers' trust. There's also the decline in coronavirus testing that, unless there's a resurgence in cases, isn't coming back. Plus, the uncertainty around the economy and the U.S. dollar could mean foreign exchange also plays a big role in 2023's numbers.

The saving grace may be in the medical device business, which is one of Abbott's largest segments. It didn't perform well last year, but COVID-19 restrictions and lockdowns in China negatively impacted its operations. And now that China has loosened those restrictions, that should help improve Abbott's numbers. Another positive for the company is that the U.S. Food and Drug Administration cleared its newest glucose monitoring system, the FreeStyle Libre 3 system, last year. Revenue from its diabetes devices rose 10% in 2022, and that momentum could continue this year.

Abbott has some growth opportunities this year that could help build some momentum, but whether it's enough to offset the challenges in the nutrition and diagnostics areas of its business is the big question.

Could the diversification and dividend income attract investors?

Last year was the first time since 2016 that Abbott's stock didn't rise in value. It has normally been a relatively safe investment to hold as its diversification has been a strength. With pharmaceuticals, medical devices, diagnostics, and nutrition all contributing to the top line, the company hasn't been dependent on just a single area of its business. The problem is that in 2022 multiple segments took a hit. 

I wouldn't expect a repeat performance in 2023 as Abbott will be going up against some soft comparables from last year, and that should help when it reports earnings. Then there's also the dividend, which with a payout ratio of around 50% is incredibly safe, even if Abbott doesn't have a much stronger bottom line in 2023 (earnings declined by 2% last year).

But with a yield of 1.8%, which is only marginally higher than the 1.7% investors can get with the average S&P 500 stock, there isn't a huge incentive to buy Abbott's stock for its dividend right now -- certainly not given the challenges the business faces this year.

Is the stock a good buy for 2023?

The consensus price target for Abbott's stock is around $126, which represents an upside of around just 12% from where it is now. 

While I don't think Abbott's stock will do as badly as it did in 2022, I'm not expecting that it will outperform the markets this year. If the bear market ends, investors are likely to pile into beaten-down growth stocks, which will possess much more upside. Although Abbott offers a dividend, it's an underwhelming one. And when you throw in the risk and uncertainty surrounding its nutrition and diagnostics segments, even the usual safety that comes with owning the stock may not be there anymore. 

Ultimately, there just isn't a compelling enough of a reason to invest in the stock, which is why I don't expect 2023 to be a much better year for Abbott's stock.