ABT May Cure Your Portfolio (Part 2) 11.16.2012

ABT’s dividend has always been an important part of Abbott’s investment identity. According to management, ABT expects that the combined dividend of the 2 companies will be at least equal to Abbott’s pre-separation annual dividend. And they went on to say that AbbVie will be even more focused on shareholder returns in the form of dividends, paying a larger portion of the dividend.

With the former in mind, ABT announced that they expect AbbVie to pay an annual dividend of $1.60 per share, starting with a quarterly dividend to be paid in February. Management also announced that they expected the new Abbott dividend to be $0.56 per share. This new rate will be in line with its peer group and growth prospects. The combined annual dividend rate of $2.16 for the 2 companies exceeds the current annual dividend rate of $2.04. And this increase is expected to be implemented 1 quarter earlier than in past years…just another way this deal is benefitting shareholders.

Away from the fundamentals for a moment, the options market is implying a $4.00 move either way by Jan 2013; this expirations cycle is past the date of this corporate event, but it is till relevant. This will be an interesting stock to watch, not only because it has recently tested its 200 day moving average, but also because investors have clearly liked the idea of the firm splitting up. Shares are up over 20% since the announcement, but market risks like the fiscal cliff may present an opportunity to get into ABT on the cheap; if one is compelled to do so.  More to come on this story.

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Part 1 here


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