Abbott Laboratories (ABT 0.63%) has proven itself as a long-term winner for investors. The healthcare giant has grown earnings over time, and the shares have climbed too. In just the past year, Abbott stock has advanced about 18%. On top of this, Abbott has paid investors dividends year after year, even increasing these payments on an annual basis. So, the company also offers shareholders the promise of passive income growth.
Abbott's performance has been driven by its diversification across four major businesses -- medical devices, diagnostics, nutrition, and established pharmaceuticals -- and its ability to develop market-leading products. For example, in recent years, Abbott's coronavirus tests have generated billions of dollars, and, in the medical devices business, its FreeStyle Libre continuous glucose monitoring system continues to be a market leader.
Now, considering this top track record, you may be wondering if Abbott can keep the good times rolling -- and even help you become a millionaire. Let's find out.
Image source: Getty Images.
Abbott's successful diversification
What I like most about Abbott is its successful diversification, with leading products across its business units -- from those I mentioned above in the diagnostics and devices units to top nutrition brand Ensure and commonly used drugs sold in international markets to round out the established pharmaceuticals offerings.
This diversification means that when one of the businesses faces headwinds, the others may compensate. For example, earlier in the pandemic, coronavirus test sales soared while medical devices sales slipped -- that business suffered as hospitals postponed surgeries to accommodate COVID patients. And in more recent times, the medical devices business has recovered and grown -- and now it's compensating for declining coronavirus testing sales as demand weakens.
The result is Abbott has generated triple-digit growth in net income over the past decade and double-digit growth in other important financial metrics over the same time period. This shows the company is growing its business, increasing profits, and benefiting from its investments.
ABT Net Income (Annual) data by YCharts
As mentioned above, Abbott can rely on the strengths of its key products to drive some of these gains. In the most recent quarter, the FreeStyle Libre brought in sales of $1.4 billion, an increase of more than 23%. And these products helped Abbott to grow sales across its business units in the quarter, excluding the sales of coronavirus tests. For the full year, excluding COVID testing sales, Abbott reported double-digit sales growth to reach $40 billion.
Abbott also offers a steady stream of new products, thanks to its growth in research and development spending over time. And the company's capital expenditures to boost future growth total $5 billion since 2021.
More than 50 years of dividend growth
On top of this, Abbott has built quite a reputation as a dividend stock, becoming a Dividend King thanks to its more than 50 years of consecutive dividend increases. And over the past three years, the company has returned more than $17 billion to shareholders through dividends and share repurchases.
This track record of dividend growth shows rewarding shareholders is important to the company, so it's likely to continue along this path. And as we can see in the chart below, Abbott's dividend payments could add significantly to your returns as a shareholder. Total returns include dividend payments.
Now, let's get back to our question: Could Abbott help you become a millionaire? The key is the word "help." Alone, most stocks won't make you a millionaire unless you make an enormous investment in that particular stock -- and that's a risky bet, even if we're talking about a high-quality player. If you invest a smaller amount, say $5,000, in a stock, and it even doubles or triples, you're still far from millionaire status.
But Abbott, as part of a diversified portfolio of quality stocks, could help you become a millionaire -- or at least add significantly to your wealth -- over the long term. By this, I mean constructing a portfolio of at least 20 stocks and holding on for a decade or longer. You don't have to build this portfolio overnight, but instead at the pace that suits your budget.
And, through this strategy, Abbott -- as a company that's proven itself and also holds great prospects -- could help you reach your financial goals over the long haul.
