While seemingly everyone is focused on artificial intelligence (AI) and tech stocks, other companies are quietly producing enormous returns for investors. This is the case with pharmaceutical giant AbbVie (ABBV +3.22%), which more than tripled the total returns of the S&P 500 during the past three years.
ABBV Total Return Level data by YCharts
Here are several reasons why.
Why AbbVie is a terrific investment
AbbVie is known as the maker of arthritis treatment Humira, the best-selling prescription drug of all time. Humira grossed well over $200 billion in all-time sales and peaked at over $21 billion in 2022. However, as you can see in the graph below, nothing lasts forever.
So what happened in 2023? Much less expensive biosimilars were approved for sale, which caused a sharp decline in Humira's sales for AbbVie. AbbVie's management knew this was coming and did a masterful job of diversifying the portfolio, starting with the 2019 acquisition of Allergan. Drugs like Botox, Juvederm, Vraylar, Linzess, and others were added to AbbVie's portfolio. In 2021, $11.4 billion, or 21% of total sales, were provided by products in Allergan's portfolio.
AbbVie also developed two more blockbuster drugs, Skyrizi and Rinvoq, which AbbVie expects to gross more than $16 billion this year and $27 billion in 2027. Finally, AbbVie continues making strategic acquisitions, such as the recent pickup of ImmunoGen and its commercial-stage cancer treatment drug, Elahere. AbbVie expects Elahere to be approved for additional treatments soon as well.
Because of these moves, AbbVie's revenue didn't significantly decline despite Humira's loss of exclusivity, as shown below (and it's on the rise again).
ABBV Revenue (TTM) data by YCharts
It's easy to see why AbbVie investors have done so well, but what about in the years ahead?
Is AbbVie stock a buy now?
Along with the above, AbbVie is an investor favorite because it has raised its dividend yearly since its inception. It currently pays $1.55 quarterly for a yield of about 3%. However, now may not be the most advantageous time to purchase AbbVie's stock. As shown below, the dividend yield is near a five-year low due to the recent share price increase.
ABBV Dividend Yield data by YCharts
The yield is also 34% below its recent average, suggesting optimism is already priced into the stock. AbbVie is one of my most successful investments, but I only buy it when the dividend yield nears 4%.
AbbVie is a terrific company and an excellent stock for income investors because of its consistently rising payout. However, the stock is best to hold for now as there are likely better times to come for accumulating the shares.
