Linked here’s a detailed quantitative evaluation of Abbott Laboratories (ABT). Beneath are some highlights from the above linked evaluation:
Firm Description: This diversified well being care merchandise firm is now targeted on nutritionals, diagnostics, generic medication, and medical units, following the spinoff of its R&D-based prescription prescribed drugs enterprise initially of 2013.
Fair Value: In calculating truthful worth, I contemplate the NPV MMA Differential Honest Worth together with these 4 calculations of truthful worth, see web page 2 of the linked PDF for an in depth description:
1. Avg. Excessive Yield Worth
2. 20-Yr DCF Worth
3. Avg. P/E Worth
4. Graham Quantity
ABT is buying and selling at a reduction to solely 2.) above. When additionally contemplating the NPV MMA Differential, the inventory is buying and selling at a 21.8% premium to its calculated truthful worth of $91.28. ABT didn’t earn any Stars on this part.
Dividend Analytical Data: On this part there are three doable Stars and three key metrics, see web page 2 of the linked PDF for an in depth description:
1. Free Money Circulate Payout
2. Debt To Whole Capital
3. Key Metrics
4. Dividend Development Fee
5. Years of Div. Development
6. Rolling 4-yr Div. > 15%
ABT earned one Star on this part for two.) above. The inventory earned a Star on account of its most up-to-date Debt to Whole Capital being lower than 45% The corporate has paid a money dividend to shareholders yearly since 1926 and has elevated its dividend funds for 52 consecutive years.
Dividend Income vs. MMA: Why would you assume the fairness threat and spend money on a dividend inventory in case you might earn a greater return in a a lot much less dangerous cash market account (MMA) or Treasury bond? This part compares the incomes skill of this inventory with a high yield MMA. Two gadgets are thought-about on this part, see web page 2 of the linked PDF for an in depth description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $112 is under the $500 goal I search for in a inventory that has elevated dividends so long as ABT has. If ABT grows its dividend at 7.8% per yr, it’ll take 10 years to equal a MMA yielding an estimated 20-year common charge of three.75%.
Friends: The corporate’s peer group contains: Bristol-Myers Squibb Firm (BMY) with a 4.8% yield, Johnson & Johnson (JNJ) with a 3.2% yield, and Eli Lilly & Co. (LLY) with a 0.7% yield.
Conclusion: ABT didn’t earn any Stars within the Honest Worth part, earned two Stars within the Dividend Analytical Information part and didn’t earn any Stars within the Dividend Revenue vs. MMA part for a complete of two Stars. This quantitatively ranks ABT as a 2-Star Weak inventory.
Utilizing my D4L-PreScreen.xls mannequin, I decided the share worth would wish to lower to $85.89 earlier than ABT’s NPV MMA Differential elevated to the $500 minimal that I search for in a inventory with 52 years of consecutive dividend will increase. At that worth the inventory would yield 2.6%.
Resetting the D4L-PreScreen.xls mannequin and fixing for the dividend progress charge wanted to generate the goal $500 NPV MMA Differential, the calculated charge is 10.3%. This dividend progress charge is larger than the 7.8% used on this evaluation, thus offering no margin of security. ABT has a risk rating of 1.75 which classifies it as a Medium threat inventory.
ABT discovers, develops, manufactures and sells well being care merchandise. Its merchandise embody branded generic prescribed drugs manufactured internationally, marketed and bought exterior the US. The corporate enjoys robust positions in a number of well being care product classes and international markets, with a concentrate on growth in rising markets.
The corporate’s free money stream payout of 76% (up from 46%) is above my most. As well as, its debt to whole capital of 29% (down from 32%) is under my most popular most of 45%. The inventory is buying and selling at a major premium to my calculated truthful worth of $91.28. That, and its low yield retains me from opening a place within the inventory.
Disclaimer: Materials offered right here is for informational functions solely. The above quantitative inventory evaluation, together with the Star ranking, is mechanically calculated and is predicated on historic data. The evaluation assumes the inventory will carry out sooner or later because it has prior to now. That is usually by no means true. Earlier than shopping for or promoting any inventory you ought to do your individual analysis and attain your individual conclusion. See my Disclaimer for extra data.
Full Disclosure: On the time of this writing, I held no place in ABT (0.0% of my Dividend Development Portfolio) and was lengthy in JNJ.
Associated Articles:
– Leggett & Platt, Inc. (LEG) Dividend Stock Analysis
Tags: ABT, BMY, JNJ, LLY,
