Abbott Laboratories (ABT, Financial) has informed its shareholders through a news release published on its website that its board of directors has announced 26.5 cents per ordinary share quarterly dividend.
This quarterly dividend leads to an annual dividend of $1.06 for a dividend yield of 2.05% according to the current market valuation per share of Abbott Labs.
The dividend of 26.5 cents will be paid on Nov. 15 to Abbott Labs’ shareholders of record as of Oct. 13.
Abbott Labs, which is a S&P 500 Dividend Aristocrats Index member, has raised the portion of free cash flow that it pays out annually to its shareholders for 45 years in a row.
Abbott Labs is a U.S. global healthcare company which derives its income and cash flow from the production and sale of a broad range of products.
The company’s business is subdivided in four main segments of Established Pharmaceutical Products, Diagnostic Products, Nutritional Products and Vascular Products.
From the sale of its products, Abbott Labs can generate about $4.5 billion in operating cash flow every year of which – after deducting the portion of funds used as capex – 50% can be used by the company for business’ growth purposes and for dividend payment.
The payment of the quarterly dividend will be for sure sustained by a solid third quarter of fiscal 2017 since analysts forecast that Abbott Labs will post a 10.2% increase year over year in EPS to 65 cents. This average figure for EPS is a mean of 18 estimates of analysts. Estimates on the third quarter of fiscal 2017 range between 64 cents and 66 cents.
Source: Yahoo Finance
A solid increase in earnings is estimated on an average figure for quarterly revenue of $6.71 billion. If Abbott Lab’s will really invoice customers for such an amount, this will be a strong 26.60% upside from revenue of one year ago.
Earnings for the fiscal 2017 – fiscal 2018 period and for the next five-year period are expected to grow at a tune of 11.60%-11.27%. The second growth rate is an annual average. GuruFocus gives Abbott Labs a profitability & growth rating of 7 out of 10.
The balance sheet of Abbott Labs is solid with $9.83 billion in cash on hand and securities and even though the healthcare company has a massive $24.09 billion in total financial obligations, its ability to pay the interest expenses on the outstanding debt is not in doubt with an interest coverage ratio – computed over the trailing 12 months – of 2.92.
The balance sheet is also healthy concerning the company’s ability to meet its short-term obligations with prompt liquidity and other current assets that can be readily converted into cash: The current ratio is 2.94.
GuruFocus gives Abbott Labs a financial strength rating of 5 out of a total of 10.
The company is currently trading at $51.76 per share with a market capitalization of $89.93 billion, a price-book ratio of 2.85, a price-earnings ratio of 72.49 and a price-sales ratio of 3.81.
Abbott Labs is currently trading a few dollars below its 52-week high of $52.60 per share (the 52-week low is $37.38 per share). This may signal that the stock is a bit overvalued by the stock market at the moment, so I would wait for a pull-back before starting a position.
However, readers should know that a company that has a tradition of paying dividends to its shareholders and a long-enough history of having regularly increased them, making it a member of the S&P 500 Dividend Aristocrats Index. Abbott Labs is a more suitable investment for seeking income investors.
As of today, analysts suggest buying shares of Abbott Labs with a recommendation rating of 2 out of 5. The average target price of $54.94 per share represents only a 6.1% upside in the current market value.
Disclosure: I have no position in Abbott Laboratories.
