Last update on 2024-06-27

Abbott Laboratories (ABT) - Dividend Analysis (Final Score: 6/8)

Comprehensive dividend analysis of Abbott Laboratories (ABT), examining performance and stability using an 8-criteria scoring system. Final Score: 6/8.

Short Analysis - Dividend Score: 6

We're running Abbott Laboratories (ABT) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Abbott Laboratories (ABT) has a dividend score of 6 out of 8 based on its performance and stability according to an 8-criteria system. The key points include a current dividend yield of 1.8534%, which is nearly six times higher than the industry average. ABT's dividend per share has grown from $0.4354 in 2003 to $2.04 in 2023, with an average annual growth rate of 9.25% over the past 20 years, despite some inconsistencies. The payout ratio averages 59.70% over 20 years, remaining below the 65% threshold for most years, translating to a sustainable dividend policy. While there have been a few years where dividend coverage by earnings and cash flow was strained, the overall trend indicates well-maintained dividend payments. ABT has not only paid dividends for over 25 years but has also managed to keep them stable without any significant drops. Moreover, ABT has engaged in stock repurchases 55% of the time over the last two decades, enhancing shareholder value. However, there were some less consistent years regarding buybacks.

Insights for Value Investors Seeking Stable Income

Given Abbott Laboratories' strong track record in maintaining a high dividend yield, consistent growth in dividend payments, and a sustainable payout ratio, it is recommended for income-seeking investors to consider this stock. The occasional volatility in growth and payout anomalies in certain years warrant attention but do not overshadow the overall positive performance. ABT's long history of paying stable dividends and engaging in stock repurchases also highlights its commitment to returning value to shareholders.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

The dividend yield measures how much a company pays in dividends each year relative to its stock price. A higher yield indicates a potentially better investment for income-seeking investors.

The current dividend yield of Abbott Laboratories (ABT) at 1.8534% is significantly higher than the industry average of 0.29%. This is a positive indicator for investors looking for steady income, as ABT is providing almost six times the industry norm. Historical data shows that ABT's yield has consistently been higher than the industry average over the last 20 years, which further strengthens ABT's position as a reliable dividend-paying company. The yield peaked during periods of lower stock prices, particularly in 2010 and 2009 with respective yields of 3.5901% and 2.8894%. This trend is good, indicating that despite stock price fluctuations, ABT has managed to sustain a yield that is attractive compared to its peers. Moreover, the increasing trend in dividend per share, growing from $0.4354 in 2003 to $2.04 in 2023, underscores the company's commitment to returning value to its shareholders through dividends.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate examines the rate at which a company has increased its dividends per share annually. A growth rate above 5% over an extended period, such as 20 years, signifies a company's strong financial health and consistent profitability. It also indicates a commitment to rewarding shareholders and confidence in sustaining future earnings.

Examining Abbott Laboratories' dividend per share growth from 2003 to 2023 reveals a rather volatile pattern. Though there are years with impressive growth rates, like 2021 (25%) and 2014 (57.1429%), there are also years with negative or minimal growth, notably 2013 (-41.9329%). Despite these fluctuations, the average growth rate stands at approximately 9.25%, which is indeed higher than the 5% benchmark. This suggests a general upward trend in dividends. However, the volatility in some years should be taken into account as it points towards inconsistency.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio is the proportion of earnings paid out as dividends to shareholders. A ratio below 65% is considered sustainable.

Looking at Abbott Laboratories' payout ratio over the past 20 years, we observe that it has averaged 59.70%. This is a positive trend as it remains below the 65% threshold, suggesting a sustainable dividend policy. However, notable spikes in certain years, such as 2016 (110.17%) and 2017 (388.71%), can be attributed to exceptional circumstances, possibly due to one-time charges or adjustments. Such anomalies necessitate a deeper dive into those specific fiscal years. Overall, Abbott's average payout ratio comfortably meets the criterion, signaling good dividend health.

Dividends Well Covered by Earnings?

Earnings coverage of dividends measures the proportion of earnings being paid out as dividends. A lower ratio indicates well-covered dividends, while a higher ratio suggests potential over-distribution. It is vital for assessing sustainability.

From 2003 to 2023, Abbott Laboratories generally maintains a favorable ratio of covering dividends with earnings, mostly staying well below 1, indicating that earnings significantly exceed dividend payments. Consequently, the dividends are well-covered by earnings for most years except for 2016 and 2017, where the ratio exceeded 1. Specifically, in 2017, the ratio peaked at 3.887, implying potential over-distribution or exceptional expense periods. Nonetheless, a consistent trend below 1 across other years signals financial prudence and sustainability. This is a good indicator for investors concerned with dividend reliability.

Dividends Well Covered by Cash Flow?

Explain the criterion for Abbott Laboratories (ABT) and why it is important to consider

2023 starts with a coverage of 0.606, goes back three times below 0.445 and pauses twice more until encomopasing the same in 2022. It is essential to determine if these earnings post-reinvestment are capable of paying dividends and boosting share buybacks.

Stable Dividends Since the Company Began Paying Dividends?

Analyze the criterion of stable dividends over the past 20 years for Abbott Laboratories (ABT). Discuss why stability in dividend payments, such as not dropping by more than 20%, is vital for income-seeking investors.

Abbott Laboratories (ABT) exhibits a strong performance in dividend stability over the past two decades. With the data provided, not a single year shows a drop in dividend per share by more than 20%, confirming the company's commitment to maintaining robust shareholder returns. For example, dividends increased from $0.4354 in 2003 to $2.04 in 2023. Importantly, the significant jump in 2013 can be clarified: the apparent drop in 2013 to $0.56 from $0.9644 is due to the AbbVie spin-off. This context further supports Abbott's sound dividend policy, which is attractive for income investors.

Dividends Paid for Over 25 Years?

A company paying dividends for over 25 years demonstrates stability and a commitment to returning value to shareholders, which is a crucial indicator of financial health and investor confidence.

Abbott Laboratories (ABT) has paid consistent dividends from 1998 through 2023, with dividend per share increasing from $0.2626 in 1998 to $2.04 in 2023. This trend shows a unwavering commitment to shareholders over a long period, indicating stability and robust financial health. Additionally, the steady rise in dividends signifies strong operational performance and prudent financial management. This is a very positive trend that should foster investor confidence.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases reflect a company's commitment to return capital to shareholders which can be a strong positive indicator for financial health and investor confidence.

Abbott Laboratories (ABT) has demonstrated a pattern of repurchasing shares 11 out of the last 20 years, which accounts for approximately 55% of the period analyzed. This trend tends to be seen as favorable by investors because it indicates confidence by the company's management in its own financial health and future prospects. Share repurchase programs can improve metrics such as Earnings Per Share (EPS) by reducing the number of outstanding shares, thereby enhancing shareholder value. However, it is important to note that the number of shares on few occasions, namely in years like 2015 and 2016, did not follow a consistent pattern which might raise some questions on the strategic focus during those times. Despite these occasional deviations, the overall trend in the last two decades tilts towards reliability. Therefore, Abbott's stock repurchase practice can be construed as generally good, albeit with some variation in select years.