Linked here is a detailed quantitative analysis of Abbott Laboratories (ABT). Below are some highlights from the above linked analysis:
Company Description: Abbott Laboratories is engaged in the discovery, development, manufacture and sale of a diversified line of healthcare products including: drugs, nutritional products, diabetes monitoring devices and diagnostics.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
- Free Cash Flow Payout
- Debt To Total Capital
- Key Metrics
- Dividend Growth Rate
- Years of Div. Growth
- Rolling 4-yr Div. > 15%
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
- NPV MMA Diff.
- Years to > MMA
Other: ABT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index.
Conclusion: ABT earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks ABT as a 5 Star-Strong Buy.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $66.87 before ABT's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 38 years of consecutive dividend increases. At that price the stock would yield 2.57%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.6%. This dividend growth rate is less than the 8.3% used in this analysis, thus providing a margin of safety. ABT has a risk rating of 1.25 which classifies it as a low risk stock.
All pharmaceutical companies face the inevitable patent expirations and the ensuing generic competition. However, ABT's product pipeline includes potential significant launches in the medical device and pharmaceutical areas. With its strong financials and excellent management team, ABT is in a position to continue its growth and to generate strong returns. I will continue to add to my position while it is trading below my buy price of $61.24 and as my allocation allows. For additional information, including the stock's dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in ABT (2.1% of my Income Portfolio). See a list of all my income holdings here.