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Unloading ABBV from my portfolio, what about Abbott?

I was looking for information about ABBV and ABT to find out whether to keep these stocks or get rid of them. It was very difficult to find anything which would help me to make the decision. Keep the stocks or not? That’s the question.

Mostly I used information about ABBV and ABT from Morningstar web site since today they updated their outlook. The Morningstar analysts like ABBV over ABT. But still their favorable outlook for ABBV is only until roughly 2015 or 2016. Then Humira drug will be over and who knows what would happen next.

I am a bit confused and I do not like the uncertainty in regards to ABBV as a long term investment.

The next, in my opinion negative point is the current declared dividend. Prior to company spinoff the dividend rate for ABBV was $1.6 a share. Today ABBV announced a new dividend at 40 cents a share. If my calculator is correct, it translates into a yield of 1.2%. With no history, no certainty limited data, this stock no longer meets my dividend growth criteria and I decided to unload shares of this stock from my TD portfolio and I will be doing the same in my ROTH IRA account.

What about ABT?

Unfortunately I have the same dilemma with Abbott. After the spinoff this stock also no longer meets my criteria. The Morningstar outlook is somewhat confusing. They didn’t like what was left in Abbott after the company split. They claim that it was actually the Humira drug which generated income and covered Abbott’s loses in its other segments. However, Morningstar still believes Abbott will be able to consolidate and provide annual growth of around 4.8%.

Does it make sense holding ABT?

As a dividend investor I am actually disappointed with the outcome of this spinoff. The new dividend yield is now 1.62%, way below my requirements. Will the company be able raising dividends to reach pre-spinoff level? And how long will that take to reach previous levels? Does it make sense to lock my money in a company paying me only 20$ a year, while I can relocate to another company which will pay me a lot more?

A simple comparison:
I currently hold 15 shares of MCD, total market value around 1364.90 dollars and receiving $46.20 annual dividend.
With the new ABT I would hold 34 shares, total market value 1133.90 dollars and receiving $19.04 annual dividend.

I am interested in rising dividends and secure dividend income stream. Abbott is no longer providing me with such income. Therefore I believe there is time to sell this stock and replace it with a different company.

What do you think, sell or hold?

2 responses to “Unloading ABBV from my portfolio, what about Abbott?”

  1. admin says:

    CI, I understand your point of view. I was thinking for a moment to hold ABT too, because I think ABT can get to 50 – 60 a share price, but then I told myself stick to the plan. What is your plan? Dividend investing, correct? And that was the deal breaker. Why holding my limited funds in a company which will pay me only 20 dollars annually when there are the same quality companies out there which can pay me twice as much on the same invested capital.

  2. CI says:

    I have been an Abbott shareholder for a while and still plan to hold both companies. I still like ABT, but yes the yield is quite low. I plan to hold these shares, but will likely not buy more anytime soon. I’m still a fan of this company, the only thing I don’t like is the low dividend.

    I’m more concerned with ABBV. For starters I didn’t realize that Humira was the reason the old Abbott’s dividend was so hefty. Secondly, just like you mentioned, Humira is a concern a few years down the road. Thirdly I do not like pure pharmaceutical companies. I do not understand drugs and potential pipeline blockbusters. I know nothing about it. I don’t mind holding a diversified healthcare company where pharmaceuticals are just part of the business (JNJ, old ABT), but pure pharma just seems to be too much feast or famine. For the time being I’m going to hold Abbvie, but it will be on a short leash! Again I’m not adding new shares.

    I’ve seen quite a few dividend investors unload their shares you’re not alone.

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