Abbott Laboratories, which has a strong track record for dividend yield growth, is on the edge of something very big as it prepares to split the company into two.
Abbott Laboratories is on the edge of something very big. In October, the company announced that it would be splitting into two: Abbott and AbbVie. And that split is poised to happen before the end of 2012.
The split will create two companies: Abbott will be $17 billion pharmaceuticals with nutritional, diagnostic and vascular products; and AbbVie will be an expected $18 billion company consisting of proprietary pharmaceuticals.
Abbott is one of those sought after companies that pay out a dividend. And furthermore, it has a great dividend growth rate of 10% over the past three years, according to SeekingAlpha. In fact, its dividend payout has increased for the last 40 years. Currently, the dividend payout is $2.04.
The well-performing company has a good shot of making the split work. SeekingAlpha is particularly positive that Abbott will come out strong because it has outperformed peers like Johnson & Johnson, Medtronic Inc. and Baxter International Inc.
SeekingAlpha took a look at the two new companies that will form as a result of the split. Since Abbott will focus on emerging markets, it will have the higher growth rate. But focusing on developed markets, like AbbVie, can mean steady waters. AbbVie will focus on continuting to grow its already leading brands.
However, Abbott is getting close to losing some patents, which will make AbbVie, which will have a more intense research focus, all the more important.
Rheumatoid arthritis drug Humira currently holds over 30% of the autoimmune market. Revenues from Humira could top $10 billion by 2013, according to Forbes. However, Abbott loses Humira’s patent at the end of 2016. At that point the market share will steeply decline.
Just months before Humira’s patent expires, Abbott will lose Kaletra, an antiviral used to treat HIV. The market share for Kaletra is much smaller than Humira at just 8%. But once the patent expires in June 2016, Forbes forecasts that Kaletra’s market share will drop to 2.5%.
On Wednesday, Abbott’s shares closed at $61.79. However, 18 brokers on Yahoo! Finance set a median price target of $65, with one going so far as to estimate $80.
The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock.