AbbVie, which trades at price-to-earnings (P/E) ratio of 18.2 times, is cheap compared to the industry average of over 26 times, and 21 times for the S&P 500.
Its top-selling drugs like Humira rake in billions in sales and add to the bottom line. The $105 billion company offers double-digit earnings growth and solid upside. Additionally, its nearly 4% dividend yield is ideal for those happy with annual paychecks.
AbbVie, which was spun off from Abbott(ABT) - Get Report a few years ago, is a research-focused drug maker that makes most of its money from Humira and Imbruvica. Since 2003, when it was approved, Humira has been the second biggest selling prescription drug after Pfizer's(PFE) - Get Report Lipitor.
There are, however, concerns about the impact of generic competition affecting Humira's sales. But AbbVie has an impressive pipeline of drugs. The company has 12 late-stage clinical trials presently underway and an additional 21 drugs in mid-stage development. Many of these are believed to have billion-dollar potential.
Analysts have projected five-year earnings per share (EPS) growth for the stock. AbbVie is expected to offer over 14% annual EPS growth during this period, more than biotech peers such as Gilead(GILD) - Get Report , Biogen(BIIB) - Get Report , and Amgen(AMGN) - Get Report .
Faster growth should come at a reasonable price so that investors can position themselves for the stock's upside. AbbVie has a price-to-earnings growth (PEG) ratio of 0.82. This is much cheaper than Bristol-Myers Squibb's(BMY) - Get Report 1.38 and Alexion Pharmaceuticals'(ALXN) - Get Report 1.22.
AbbVie shares are up just 5.5% so far this year. The stock is expected to deliver solid gains over the next 12 to 18 months.
However, you won't have to wait that long to start receiving AbbVie's $2.56 per share annualized dividend. The company has a solid track record of hiking payouts. It has grown dividends by over 40% since 2013. And the company still pays less than 47% of its profits as dividends, which shows that there is scope to earn bigger dividends in future.
AbbVie is one of few excellent investment opportunities in the healthcare space with double-digit earnings growth, a reasonable price, and a safe dividend yield. Even the likes of Pfizer, Novartis(NVS) - Get Report , Sanofi(SNY) - Get Report , Merck(MRK) - Get Report , and Johnson & Johnson(JNJ) - Get Report can't boast of this.
With over $6 billion in cash, AbbVie can swiftly take advantage of any potential Merger & Acquisition situations that can boost its already fantastic growth prospects. As long as the world faces today's health issues that range from life-threatening illnesses to chronic conditions, companies like AbbVie will be extremely dependable businesses to own.
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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.