Abbott Laboratories (ABT 0.63%) is a leading healthcare company with a global presence. It has a diverse business with four key segments: established pharmaceuticals, diagnostics, nutrition, and medical devices. The stock also provides investors with a steady and growing dividend.
The company's stock has what it takes to be a stable long-term investment, but is it also the type of investment that can make you a millionaire in the future?
What kind of long-term returns are necessary to get to $1 million?
If you're hoping that an investment gets you to $1 million, you need to consider how much you're able to invest, and how long you plan to hold your investment for. Those factors can drastically impact what kind of return you will need. Investing for 30 years, for example, will require less of an annual return than if you're investing for 25 years.
The table below shows the annual return the stock would need to average for it to grow to a value of $1 million, based on investment years and the initial investment amount:
| Investment Amount | 20 Years | 25 Years | 30 Years | 35 Years |
|---|---|---|---|---|
| $5,000 | 30.3% | 23.6% | 19.3% | 16.3% |
| $10,000 | 25.9% | 20.2% | 16.6% | 14.1% |
| $15,000 | 23.4% | 18.3% | 15% | 12.7% |
| $20,000 | 21.6% | 16.9% | 13.9% | 11.8% |
| $25,000 | 20.3% | 15.9% | 13.1% | 11.1% |
| $30,000 | 19.2% | 15.1% | 12.4% | 10.5% |
Calculations by author.
If you only have 20 investing years left, you will need an exceptionally high return of at least 19%, even if you invested $30,000. But if you're willing to keep the initial investment in that stock for 35 years, then the annual return you will need may be as low as 10.5%. This is where it's important to consider your individual situation as there's not always a simple answer to whether a stock can grow to $1 million; it will depend on these two variables -- investment amount and years invested.
Is it probable for Abbott Laboratories to generate these types of returns?
The S&P 500 averages a long-run return of 10% annually. Right off the bat you can see that in the table above, in every instance, you would need to expect the stock to generate returns of at least 10.5% to get to $1 million -- unless you invest more than $30,000 or invest for longer than 35 years.
That means for Abbott Laboratories to be a millionaire-making stock in most scenarios, it has to outperform the market by a fairly healthy margin. The problem I see with that is this isn't a fast-growing business. While Abbott Laboratories is profitable and is growing, there may not be a big catalyst in its future that will light a fire under its share price.
Here's how the company's quarterly growth rate has fluctuated over the past decade:
ABT Revenue (Quarterly YoY Growth) data by YCharts
Through the first half of 2023, only one of its segments generated more than the 9% growth the company has averaged over the past decade, and that's medical devices. At $8.2 billion in revenue this year, it accounts for roughly half of Abbott's operations and it rose by 11% year over year. Specifically, it was diabetes care (continuous glucose monitoring devices) that was performing exceptionally well with a growth rate of nearly 33% in the U.S. As the number of people with diabetes rises over the years, this can be a big growth opportunity for the business. But it may not be enough to make up for other slow-growing segments.
Should you expect an investment in Abbott Laboratories to grow to $1 million?
Abbott Laboratories is a mammoth healthcare business whose market cap is around $180 billion. Even at a $30,000 investment, you would need the stock to be worth more than 33 times its valuation today for your investment to end up being worth more than $1 million. That means you would need to expect Abbott Laboratories to be worth nearly $6 trillion in the future.
A lot can change over a period of 30-plus years, but this is not the type of business I would expect will experience such significant growth without drastically changing its operations (by focusing primarily on diabetes care and investing heavily into it, for example).
This stock can make for an excellent investment for retirees and people who value stability and dividends, but Abbott Laboratories isn't an investment you should expect to grow to $1 million.
