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AbbVie (NYSE: ABBV) has been a favorite for income investors since spinning off from Abbott Labs (NYSE: ABT) in 2013. For much of the past 13 years, the big drugmaker offered one of the more attractive dividend yields in the healthcare sector.
However, AbbVie's dividend yield today hovers around 2.6% -- the lowest level since early 2018. For investors accustomed to collecting yields of 3.5% or more, this relatively smaller amount might not seem appealing. But there's a good case to be made that AbbVie is still a great pick for income investors anyway.
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There are three ways that a dividend yield can decline. First, a company can cut the dividend while its share price either remains flat or rises. Second, the company's share price can rise while its dividend doesn't change. Third, both the company's share price and dividend can increase, with the share price rising faster than the dividend.
AbbVie is a clear example of the third scenario. The company inherited a long streak of dividend hikes from Abbott and has kept it going. AbbVie is a member of the Dividend Kings, an elite group of stocks with at least 50 consecutive dividend increases. It has grown its dividend (including the period when it was part of Abbott) for 54 consecutive years.
The company's dividend increases haven't been paltry, either. Since 2013, AbbVie's dividend payout has soared by almost 333%. Over the last five years, its dividend has risen 33%.
But AbbVie's share price has grown much more rapidly. The big biotech stock is up roughly 676% since 2013 and has gained 148% over the last five years, handily beating the S&P 500's (SNPINDEX: ^GSPC) during the period. Therefore, AbbVie's yield compression is entirely price-driven.
There's more growth ahead for AbbVie. The drugmaker no longer has to worry about the Humira patent cliff. Humira's two successors, Skyrizi and Rinvoq, are on track for combined sales of over $29 billion in 2026. At its peak in 2021, Humira's annual sales were around $22 billion.
Even better, the sales growth for Skyrizi and Rinvoq remains strong. In the second quarter of 2026, sales for both immunology drugs jumped by more than 24% year over year.
AbbVie's lineup also includes other blockbuster growth drivers. Sales for the antipsychotic Vraylar, the migraine therapies Qulipta and Ubrelvy, and the cancer drug Venclexta continue to grow in the double digits.
The company's pipeline features around 90 programs in clinical development, with two-thirds of them in mid- or late-stage testing. That number doesn't include the assets acquired in AbbVie's recent acquisition of Apogee Therapeutics.
Granted, Wall Street doesn't expect huge near-term gains for AbbVie. The consensus 12-month price target reflects only around 5% upside. Some analysts are more optimistic, though. For example, Morgan Stanley's (NYSE: MS) Terence Flynn thinks AbbVie's shares can rise by 14% over the next 12 months, while Scotiabank's (NYSE: BNS) Louise Chen projects a gain of nearly 18%.
AbbVie is still a good pick for income investors for one simple reason: Its dividend is likely to continue growing robustly. A yield of 2.6% isn't all that shabby. However, if AbbVie increases its dividend payouts by its average growth rate over the last five years, investors' yield on cost could easily top 4.6% within the next 10 years.
Don't overlook the peace-of-mind factor, either. AbbVie's dividend yield might not be as high as it once was, but the reliability of the dividends is as strong as ever.
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Keith Speights has positions in AbbVie. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool has a disclosure policy.
AbbVie's Dividend Yield Is at Its Lowest Level Since 2018. Here's Why the Stock Is Still a Great Pick for Income Investors Anyway. was originally published by The Motley Fool
