Is AbbVie Stock a Buy? AbbVie's Dividend Growth and Long-Term Prospects

AbbVie (ABBV) has been a popular choice among income investors, thanks to its strong dividend history and growth prospects. The company, which spun off from Abbott Laboratories in 2012, has consistently raised its dividend, with an average yield of 3.5% over the past decade. AbbVie's dividend has grown at an average rate of 14% annually, providing shareholders with a solid income stream. However, AbbVie's revenue has dipped since Humira lost patent exclusivity in 2023, which may impact future dividend growth. The company's dividend payout ratio is currently 61% of 2024 earnings, leaving room for future increases but also indicating that management may want to retain some financial flexibility.

Analysts expect AbbVie's dividend to continue growing, but at a slower pace than in the past. The company's dividend is still significant, with a 3.6% starting yield, and investors can probably expect mid- to high-single-digit dividend growth until the balance sheet is in better shape. AbbVie's long-term growth potential is indicated by several key financial metrics:

1. Revenue Growth: AbbVie's revenue has been growing consistently, with analysts forecasting an average revenue growth of 5.3% in 2025, 5.6% in 2026, and 7.5% in 2027. This growth is driven by the company's expanding pipeline and strategic acquisitions, such as the acquisition of Cerevel Therapeutics and ImmunoGen.
2. Earnings per Share (EPS) Growth: AbbVie's EPS has also been growing, with analysts forecasting an average EPS growth of 310.3% in 2024, 11.4% in 2025, and 12.5% in 2026. This growth is a result of the company's operational efficiency and cost-cutting measures.
3. Forward Price-to-Earnings (P/E) Ratio: AbbVie's forward P/E ratio is 15.29, which is lower than the industry average of 18.5. This indicates that AbbVie's stock is relatively undervalued compared to its peers.
4. Return on Assets (ROA) and Return on Equity (ROE): AbbVie's ROA and ROE have been consistently high, indicating the company's ability to generate profits from its assets and investments. In 2024, AbbVie's ROA was 12.2%, and its ROE was 244.01%.

Comparing AbbVie to its peers in the biotech and pharmaceutical sectors, we can see that AbbVie's revenue growth and EPS growth are in line with or better than its peers. For example, Amgen, another major biotech company, has an average revenue growth forecast of 5.5% in 2025 and an average EPS growth forecast of 10.5% in 2025. AbbVie's forward P/E ratio is also lower than Amgen's forward P/E ratio of 17.5. However, AbbVie's ROA and ROE are lower than Amgen's ROA of 14.5% and ROE of 32.5% in 2024.

In conclusion, AbbVie's long-term growth potential is indicated by its consistent revenue and EPS growth, relatively undervalued stock, and strong profitability. While AbbVie's ROA and ROE are lower than some of its peers, its revenue growth and EPS growth are in line with or better than its peers, and its forward P/E ratio is lower than the industry average. AbbVie's dividend is still significant, with a 3.6% starting yield, and investors can probably expect mid- to high-single-digit dividend growth until the balance sheet is in better shape. AbbVie's long-term growth prospects are promising, making it an attractive investment option for income-oriented investors.