Whether through stocks, bonds, ETFs or other types of securities, all investors love to see their portfolios generate significant returns. However, when you are an income investor, your main goal is to generate consistent cash flow from each of your liquid investments.

While cash flow can come from bond interest or interest from other types of investments, income investors focus on dividends. A dividend is the distribution of a company’s profits paid to shareholders; it is often viewed by its dividend yield, a measure that measures a dividend as a percentage of the current stock price. Numerous academic studies show that dividends are a large part of long-term returns, and in many cases dividend contributions exceed one-third of total returns.

AbbVie at a glance

AbbVie (ABBV) is headquartered in North Chicago and is in the medical business. The stock has seen a 5.65% price change since the start of the year. The drugmaker currently pays a dividend of $ 1.3 per share, with a dividend yield of 4.59%. This compares to the large-cap pharmaceutical industry’s return of 2.4% and the S&P 500’s return of 1.29%.

When it comes to dividend growth, the company’s current annualized dividend of $ 5.20 is up 10.2% from last year. Over the past 5 years, AbbVie has increased its dividend 5 times year over year for an average annual increase of 21.31%. Future dividend growth will depend on earnings growth as well as the payout ratio, which is the proportion of a company’s annual earnings per share that it pays out as dividends. Currently, AbbVie’s payout ratio is 47%, which means it has paid out 47% of its 12-month EPS as a dividend.

Profit growth looks solid for ABBV this year. Zacks’ consensus estimate for 2021 is $ 12.60 per share, with earnings expected to rise 19.32% from a year earlier.

Final result

Investors love dividends for a variety of reasons, ranging from tax benefits and lower overall portfolio risk to dramatically improving earnings from equity investments. However, not all companies offer quarterly payment.

High-growth companies or tech start-ups, for example, rarely pay a dividend to their shareholders, while larger, more established companies with safer earnings are often seen as the best dividend options. Income investors should be aware that high yielding stocks tend to struggle during times of rising interest rates. With this in mind, ABBV is a compelling investment opportunity. Not only is this a big dividend game, the stock currently sits at Zacks rank of 3 (Hold).

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