Unfortunately, there won't be a 41st consecutive dividend raise, at least not in the strictest sense.
Last year, Abbott announced that it was splitting its prescription drugs away from the rest of its health-care business. The pharmaceuticals segment will take with it about $18 billion in revenue, preventing the rest from maintaining the dividend at the current level.
But Abbott knows investors love their dividends, so in a Solomon-like move the company said the dividend will be split between both entities. Investors that hold onto shares in both companies after the spinoff won't see their dividend payments go down.
Abbott is part of an elite club of companies -- the Dividend Aristocrats -- that have raised their dividends for at least 25 consecutive years. Whether the nondrug portion, which will retain the Abbott name, will remain in the index is up to Standard and Poor's, which runs the index. The 25-year rule is technically only for inclusion into the index, not for continued membership, giving S&P some flexibility.
Not that inclusion in the index is all that important for valuation purposes. Pfizer
What does seem to be important is keeping the cash flowing. All three have raised their dividends since, giving investors confidence that the cash will continue to flow. Whether Abbott remains a Dividend Aristocrat or not, both segments will need to continue to increase their dividends to keep investors interested.
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Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Abbott Laboratories and Pfizer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.