This Stock Just Raised Their Dividend By 7%
"Abbott Laboratories Is A Rare Blend Of Income & Growth"
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Current Price: $124.84
Portfolio Purpose: Growth 📉 & Income💰
Over the past two to three years, higher-for-longer interest rates have created headwinds for many businesses. More recently, tariff implementations have added another layer of pressure. Particularly for companies with exposure to China.
Despite these challenges, Abbott Laboratories (ABT) has navigated the environment remarkably well. Margin pressures and regional headwinds persist, but the company continues to execute, grow earnings, and rewarding shareholders.
Most notably, the Dividend King delivered another solid dividend increase earlier this month—an important signal of confidence from management.
Company Overview 🥼
Abbott Laboratories is a Dividend King with a history stretching back more than a century. Founded in 1888 by physician Dr. Wallace Abbott, the company has evolved into one of the most diversified healthcare companies in the world.
Abbott went public in 1929, and famously spun off AbbVie (ABBV) in 2013. Today, Abbott operates across four segments:
Medical Devices
Diagnostics
Nutrition
Established Pharmaceutical Products
Medical Devices accounts for the largest share of revenue and remains the primary growth engine.
Geographically, Abbott operates in more than 160 countries across North America, Europe, Africa, Asia-Pacific, and South America. This gives the company broad global exposure, but also to regional disruptions like China and tariffs.
Latest Earnings: Resilience Despite Headwinds 📝
Abbott reported Q3 earnings in October, delivering a mixed—but ultimately resilient—quarter.
Revenue: $11.37 billion (missed estimates by ~$20 million)
EPS: $1.30 (in line with expectations)
Shares sold off following the report as management narrowed full-year guidance. EPS guidance was adjusted to $5.12–$5.18, compared to the prior $5.10–$5.20 range.
Even so, this still represents ~10.3% growth from 2024 EPS of $4.67. A solid performance given the backdrop in my opinion.
Through the first three quarters:
EPS: $3.65 (up from $3.33 YoY)
Revenue: $32.87 billion (up from $30.98 billion YoY)
Segment Performance Breakdown 📋
Growth was led by Medical Devices, which posted 12.5% year-over-year growth, underscoring Abbott’s strength in high-value healthcare technology.
Other segments showed steady progress:
Nutrition: +4%
Established Pharmaceuticals: +7%
Diagnostics remained the weakest segment due to pricing and volume pressure in China. However, excluding China, Diagnostics growth reached 7%, highlighting the regional nature of the problem.
New product launches also played a meaningful role, contributing roughly $500 million in incremental sales and adding more than 100 basis points to organic growth, which totaled 7.5%.
Margin Pressures: Tariffs Still Felt 💲
Operating gross margin declined from 56.3% to 55.8%, largely due to tariff impacts.
For context:
Stryker Corporation (SYK) saw gross margins rise 50 basis points to 65%
Intuitive Surgical Inc. (ISRG) saw margins decline 110 basis points to 68%
While Abbott’s margins trail peers, its diversified portfolio and scale help absorb these pressures better than many competitors.
Pristine Balance Sheet👌🏾
Abbott’s balance sheet remains a major strength.
Credit Rating: A
Long-term debt: $11.6 billion
Market cap: ~$217 billion
Cash & equivalents: $7.5 billion
Short-term debt: $1.35 billion
Leverage remains extremely manageable, providing flexibility for acquisitions, dividends, and buybacks.
Positioning for Future Growth: Exact Sciences Acquisition 🔬
Last month, Abbott announced an all-cash acquisition of Exact Sciences for $21 billion.
The deal is expected to add approximately $1.8 billion in incremental debt—minimal relative to Abbott’s balance sheet. aAnd it is targeted to close in Q2 2026, pending approval.
If completed, the acquisition would meaningfully expand Abbott’s diagnostics portfolio and should be accretive to earnings over time.
Outlook ↗️
Management expects:
High single-digit revenue growth
Double-digit EPS growth for the fiscal year
Given the macro environment, this outlook is solid. Looking ahead, lower base rates and easing tariff impacts could provide meaningful tailwinds over the next 12–24 months.
Dividend Growth Remains Intact 💰
Abbott recently announced a 7% dividend increase, raising the quarterly payout by $0.04. This marks the third consecutive year of similar-sized increases and reaffirms Abbott’s Dividend King status.
Notably:
The raise exceeds current inflation
It surpasses Stryker’s recent 4% increase
Dividend safety remains strong:
Dividends paid (Q3): $1.03 billion
Dividends paid (9 months): $3.09 billion
Operating cash flow: $6.25 billion
CapEx: $1.48 billion
This results in a ~65% payout ratio, leaving ample room for reinvestment, acquisitions, and shareholder returns.
Valuation: Expensive, But Deserved 📉
Using the midpoint of guidance, Abbott trades at a forward P/E of ~24.2x.
For comparison:
Stryker: ~26.2x forward P/E
Sector median: ~20x
Abbott’s valuation aligns with its five-year average and reflects its quality, consistency, and defensive characteristics.
That said, the margin of safety is thin. Based on long-term growth assumptions, my 2027 price target is close to the current share price of ~$124. This limits near-term upside.
Personally, I would look to add more aggressively closer to the $100 level.
Risks to Consider ⚠️
Key risks include:
Regulatory or antitrust issues surrounding the Exact Sciences acquisition
Prolonged margin pressure from tariffs and input costs
Premium valuation in the event of a broader market correction
Any of these could lead to near-term volatility.
Conclusion ✅
Abbott Laboratories continues to prove its resilience amid China headwinds and tariff pressures. Its diversified portfolio, strong balance sheet, and disciplined capital allocation position the company well for long-term growth.
With expectations for high single-digit revenue growth, double-digit EPS growth, and a well-covered, growing dividend, Abbott remains a high-quality dividend growth compounder.
While valuation limits near-term upside, long-term investors should view Abbott as a core healthcare holding, adding opportunistically during periods of weakness. I would consider adding closer to $100 per share.
For patient dividend growth investors, Abbott Laboratories remains a stock worth owning for the long haul.
Do you agree?
Happy Investing!
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Not financial advice. For educational purposes only. I am not a licensed professional. Do your own due diligence.
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