Sunday, January 6, 2013

ABBOTT spins off AbbVie

ABT Abbott Laboratories revisited.

ABBOTT Labs has been an income machine.  When I first profiled ABT as my second dividend machine since publishing this income investing blog, the stock price was $48.40, the dividend was $.44 per quarter for an annualized yield of 3.65%.

ABT Abbott Laboratories.   2011 Dividend Machine profiled on December 19, 2010

ABBOTT, symbol ABT, showed up again as a 2012 dividend machine.  The stock price was up to $60.19; the dividend increased 16% to $.51 per quarter for an annualized yield of 3.39%.

ABT Abbott Laboratories.  2012 Dividend Machine profiled on March 22, 2012

ABT provided even more income through a covered call;   A November 2012 strike price of $67.50 fetched nearly a dollar a share of income.

ABBOTT has split into two companies.  Now ABBOTT is ABT and ABBV called AbbVie.  For every share of ABT you owned at the time of the split, you would have received an additional share of the new company ABBV.

Is ABT still a dividend machine?  Let’s look at the dividend machine fundamentals of ABT.   ABT shares closed at $33.07 on Jan 4, 2013.  The company has declared a quarterly dividend of $.14 per share for a yield of 1.7%.  On the yield basis alone, ABT is no longer a dividend machine. 

ABBV, the spin off,  is expected to declare a dividend of $.40 per share.  Trading at $34.39, that yield would be 4.65%.  However, since ABBV is a new company it does not meet the dividend machine criteria of increasing the dividend every year for five years.

What should I do?   I am going to sell my ABT either through an outright sell, or a covered call that is almost certain to be taken.  I get the immediate income and a significant capital gain.   However, I am going to hold onto ABBV unless the income does materialize as expected.  I could hold both.  The combined income is greater than the old ABT and the value of $67.46 is well above either buy ($48.40 and $60.19) but I think I can get more than 1.7% from another dividend machine.

I’ll keep you posted.