Abbott Laboratories (ABT +1.49%) is a longtime leader in the healthcare industry. The medical device specialist has been around for decades, delivering solid returns to its loyal shareholders. However, the past few years have been challenging for the company. The pandemic disrupted its business and it encountered some regulatory issues, particularly the recall of some of its baby formula products.
Still, these are short-term issues that may not mean much in a few years, meaning Abbott could rebound from its recent struggles to continue delivering excellent returns. But is it a millionaire-maker stock? Let's dig deeper into the company to find out.
NYSE: ABT
Key Data Points
Long-term trends will be key
One great thing about Abbott Laboratories' business is that since it is a healthcare company, the basic services it offers will always be in high demand. And since the medical device giant has a long track record of developing newer and better products, not to mention the expertise to navigate the challenging healthcare industry, Abbott should remain relevant over the next 20 years.
The world's population is aging, and seniors need more medical care. That should provide an important tailwind to Abbott's business. Here is where the company's past performance can be somewhat informative. Of course, it isn't a guarantee of future success. However, the fact that Abbott has generally recorded growing revenue, profits, and free cash flow is an excellent sign.
ABT Revenue (Annual) data by YCharts
The strategy that has allowed it this success, including constantly developing innovative medical products, should continue to serve it well for a long time. Let's consider a specific example: diabetes care. The company has become a leader in the continuous glucose monitoring (CGM) market thanks to its FreeStyle Libre franchise.
CGM devices help diabetes patients keep track of their blood sugar levels in real time. The FreeStyle Libre has been one of Abbott's biggest growth drivers in recent years. But diabetes is a worsening global health crisis, so there is plenty of work to be done. As of the end of the third quarter, there are more than 5 million patients who use the FreeStyle Libre, about 2 million of whom are in the U.S.
Meanwhile, there are 422 million diabetes patients worldwide, so Abbott's total -- even as one of the leaders in the field -- is a mere fraction of that amount. Of course, the company doesn't currently have access to the entire diabetes population -- a large percentage live in third-world countries. Still, there is a vast global opportunity here for Abbott Laboratories. And that's just one example out of the company's extensive portfolio.
Further, the FreeStyle Libre also shows Abbott's innovative attributes. Last year it won an award as one of the best medical technologies in the past 50 years. Investors shouldn't hyperfocus on Abbott's past few years, which haven't been great -- the company's extensive track record is rather impressive.
The incredible dividend boost
Abbott is also an excellent dividend stock, something that should matter a great deal to long-term investors. Total returns, including reinvested dividends, often dwarf stock price increases over identical long periods. Just look at Abbott's performance with and without dividends in the past two decades -- the difference is night and day.
ABT Total Return Level data by YCharts
The healthcare giant should maintain a solid dividend program moving forward. Abbott Laboratories is a Dividend King and has now raised its payouts for 51 consecutive years. After pulling off such an incredible feat, management won't want to miss one annual raise and have to start all over unless the business is in serious trouble, which doesn't seem to be the case. Investing in this stock and opting to reinvest dividends should help investors earn excellent returns in the next 20 years.
A millionaire-maker stock?
Can Abbott Laboratories turn an initial investment of $100,000 into $1,000,000 in the next 20 years? That would require a compound annual growth rate of about 12.2%. In my view, the medical device expert can pull that off -- and then some -- as long as investors reinvest dividends. So in my view, Abbott Laboratories can help investors become millionaires.
