Wednesday, June 17, 2015

Big Pharma provides big income ABBV

Big Pharma is about the only area of interest for me.   I see several calls on these stocks.  This post profiles a call on AbbVie.

AbbVie, symbol ABBV, is in two of my Dividend Machine Model Portfolios because Abbott Laboratories spun off ABBV.   All spin offs in my model portfolios stay in the portfolio.

ABBV would not be a Dividend Machine because the yield of 3% is less than the 3.5% that I require for 2015.  Moreover, EPS are less than the dividend paid out.   However, the “pipeline” is good and many think ABBV has growth potential.

ABBV has paid a dividend since the spin off beginning with a dividend of $.40 in January 2013.  If you own ABBV on the next expected ex-dividend date of July 11, 2015, you will receive a quarterly dividend of $.51.   That represents an annualized increase of 33%.

If you own ABBV as a result of the spin off, your cost basis is $25.62 but if you buy it today you will need to pay about $67.61.  This is quite a nice capital gain.   And today, you have a chance to sell a nice call.

See the table below for the call option details on a Sep. $72.50 call.


Disclosure:  Long ABBV with multiple calls June, July, and Sept.