AbbVie Has It All: Growth, Dividend Growth and Compelling Valuation


I have held AbbVie (ABBV) since it was originally spun off from Abbott Labs. Moreover, I have been aggressively adding to my position for clients needing current income and dividend growth. All in all, it has been an excellent performer in spite of the fact that it is being ridiculously undervalued by Mr. Market. No matter what widely-accepted valuation measurement I look at, AbbVie appears insanely cheap.

As of yesterday’s close (June 24, 2019) AbbVie was trading at a blended P/E ratio based on adjusted operating earnings of 9.4 offering a dividend yield of 5.5%. This represents a significant discount to its historical normal P/E ratio of 14.5 and its intrinsic value P/E ratio of 15.

Furthermore, as of yesterday’s close, AbbVie was also trading at a price to EBITDA of 7.8 which is a significant discount to its normal price to EBITDA of 10.9. Additionally, and I consider this important since AbbVie is a dividend growth stock, AbbVie’s normal price to operating cash flow was 9.3 compared to its normal price to operating cash flow of 13.4 and its fair value price to operating cash flow of 15.

AbbVie was also trading at its lowest price to sales ratio of 3.66 since it was spun off and was available to investors at attractive double-digit earnings yields and cash flow yields. But most importantly, all these incredible valuations were supported by strong above-average historical growth and expectations for continued future growth in each of the above metrics.

On June 20, 2019 AbbVie also maintained its $1.07 per share quarterly dividend which is in line to be a significant increase over last year’s $3.95 dividend per share. Which by the way, is also well covered by both operating cash flow and free cash flow. Furthermore, according to Argus research in May of this year, AbbVie updated its adjusted earnings 2019 guidance to $8.73 to $8.83 which was up from its prior guidance of $8.65 to $8.75. (Note: I will be elaborating on all these metrics and more later in the FAST Graphs analyze out loud video).