Billionaire hedge fund manager Ken Griffin, founder and CEO of Citadel, made a big move last quarter into one of the best dividend stocks on the market: AbbVie (ABBV +0.48%).
Griffin added 2.7 million shares of the pharmaceutical company, boosting his hedge fund's stake in AbbVie by some 547%. Citadel now owns 3.2 million shares of AbbVie worth a total of about $798 million. That stake makes up about 0.46% of its total portfolio.
AbbVie is a tremendous income investment. The company has increased its annual payouts for 54 straight years -- if one includes its time as a part of Abbott Labs, from which it was spun off in 2012. That track record earns it a place in the exclusive group of Dividend Kings -- companies that have raised their payouts for at least 50 straight years.
In mid-August, AbbVie paid out a third-quarter dividend of $1.73 per share. At the current share price, it yields 2.6%.
This trade reflects a defensive posture from Griffin, as a big move into a stable, defensive, dividend-paying stock like AbbVie perhaps indicates growing uncertainty about the market, which is trading at historically high valuation levels.
Ken Griffin, founder of Citadel. Image source: Getty Images.
It's somewhat in step with a recent move that Griffin made to sell off 80% of the assets he bought from AI-focused hedge fund Situational Awareness. Those assets had been purchased at a discount by Griffin because the heavily tech and AI-oriented fund had suffered significant losses. The assets were integrated into Citadel's Wellington Fund.
According to CNBC, Griffin told investors that he made some 100 block trades of stocks worth more than $4 billion in total value to de-risk the portfolio and lock in profits.
Wall Street is bullish on AbbVie
In the days since Citadel's second-quarter 13F was filed on Aug. 14, AbbVie stock has risen from about $249 per share to its current price of roughly $264 per share, a 6% gain. The stock is now up about 16% year-to-date.
Wall Street remains bullish on AbbVie stock, with an overwhelming 75% of analysts covering the stock rating it as a buy. It has a median price target of $282.50 per share, which would suggest about 7% upside from here over the next 12 months.
While the stock has a gaudy price/earnings ratio of 74, its forward P/E is just 18 and its longer term five-year price/earnings-to-growth ratio is just 0.47. When a stock has a PEG ratio below 1, that means it is a good value relative to its anticipated earnings growth.
The company's current high P/E ratio is a bit skewed because its earnings over the past 12 months have been impacted by acquisition costs. So, the forward P/E and PEG ratios are more accurate depictions of its earnings with respect to its share price.
NYSE: ABBV
Key Data Points
AbbVie owns a roster of blockbuster drugs, including Rinvoq, Skyrizi, Vraylar, Botox, Qulipta, and Ubrelvy. It has also recently made several acquisitions to bolster its pipeline of drugs in areas like immunology, cancer and oncology, obesity, and neuroscience.
The company still has an abundance of cash, with cash flows from operations rising 7% year over year to $7.3 billion. That steady flow of cash will help it keep funding its dividend.
