Abbott Laboratories (ABT -0.26%) stock recently popped up in response to a first-quarter earnings report that was much better than investors had been expecting. The company's latest report was well received by Wall Street, but plenty of individual investors noticed that total sales declined a worrisome 18.1% year over year.
Shares of Abbott climbed about 18% over the past month. Now the stock offers a paltry 1.8% dividend yield.
Is Abbott Laboratories still a good dividend stock to buy following its recent run-up? To find out, let's look at the good news and the not-so-good news.
COVID-19 diagnostic sales can't decline much further
Demand for COVID-19 tests continued to decline rapidly. First-quarter COVID diagnostic sales dropped 78% year over year. As a result, total revenue declined 18% year over year.
We can expect COVID testing demand to slide even further, but it won't be a very big deal for Abbott shareholders. First-quarter COVID test sales fell to $730 million, and the company only expects another $770 million for the rest of 2023.
Once adjusted to exclude COVID test sales, Abbott reported first-quarter organic growth of 10% year over year. Now that COVID test revenue is expected to provide less than 3% of total revenue for the last nine months of 2023, growing sales from the rest of Abbott's product lineup have a chance to push the entire company forward.
Growth across the board
In developed nations around the world, older age groups are overtaking younger ones. From 2009 through 2019, the number of Americans over the age of 65 grew by 36%, compared to a gain of just 3% for the under-65 population.
During the decade that ended in 2019, average annual out-of-pocket healthcare expenses reported by America's over-65 population rose 41% to $6,833...and are still climbing. With a diverse collection of health-related businesses, Abbott is perfectly lined up to benefit from steadily increasing health-related expenses, and it shows.
In the first quarter, U.S. sales from Abbott's nutrition business soared 19.9% year over year -- and this wasn't the only big positive. U.S. sales of its continuous blood glucose monitor system, FreeStyle Libre, surged around 50% year over year to $1.2 billion.
In the last half of 2023, we could see more contributions from Abbott's medical device segment. In January, the Food and Drug Administration approved Navitor, the company's next-generation aortic valve implantation system. More recently, Abbott shared data from a study that showed its TriClip system was superior to the current standard therapy for treating leaky tricuspid valves.
51 years of dividend raises
Abbott's dividend doesn't offer an amazing yield right now, but investors can count on its payout rising steadily for many years to come. In February the company declared its 397th consecutive quarterly dividend payment.
Abbott has increased its dividend payout at least once a year for 51 consecutive years. Further payout bumps shouldn't be a problem, either. The company generated an outstanding $7.8 billion in free cash flow (FCF) over the past 12 months, and needed just 42% of this sum to meet its dividend obligation.
Shares of Abbott are way up over the past month, but the stock is still trading at 22.4 times trailing FCF. This is a fairly high multiple, but Abbott can still grow fast enough to deliver market-beating gains over time. Three out of four operating segments grew sales by more than 10% last year.
Now that COVID test sales are near their bottom, overall earnings and the dividend payout have a chance to soar over the next few years. Adding some shares of Abbott to your portfolio now looks like a smart way to build a passive income stream that can fuel your retirement dreams.
