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Linked here is a detailed quantitative analysis of AbbVie Inc. (ABBV). Below are some highlights from the provided analysis.

Company Description

AbbVie Inc. is a global research-based pharmaceuticals business that emerged as a separate entity following its spin-off from Abbott Laboratories at the start of 2013. AbbVie's key drug is Humira for rheumatoid arthritis.

Fair Value

In calculating fair value, I consider the NPV MMA Differential Fair Value, along with these four calculations of fair value. See page 2 of the linked PDF for a detailed description.

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

AbbVie Inc. has recently been trading at a premium to all four valuations mentioned above. Since AbbVie Inc.'s tangible book value is not meaningful, a Graham number cannot be calculated. When also considering the NPV MMA Differential, the stock has been trading at a 9.1% premium to its calculated fair value of $154.49. AbbVie Inc.'s stock did not earn any Stars in this section.

Dividend Analytical Data

In this section, there are three possible Stars and three key metrics. See page 2 of the linked PDF for a detailed description.

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Dividend Growth
6. Rolling Four-Year Dividend > 15%

AbbVie Inc. earned two Stars in this section for points 1 and 3, as shown above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years.

The stock also earned a Star for having an acceptable score in at least two of the four key metrics measured. The company has paid a cash dividend to shareholders every year since 1926, and it has increased its dividend payments for 52 consecutive years.

Dividend Income vs. MMA

Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section. See page 2 of the linked PDF for a detailed description.

1. NPV MMA Diff.
2. Years to > MMA

AbbVie Inc. earned a Star in this section for its NPV MMA Diff. of $584 This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as this one has.

If AbbVie Inc. grows its dividend at 4.8% per year, it will take one year to equal a MMA yielding an estimated 20-year average rate of 3.75%. The stock has earned a check for the key metric 'Years to >MMA' since its one-year rate is less than the five-year target.

Peers

The company's peer group includes: Merck & Co. Inc. (MRK) with a 2.4% yield, Bristol-Myers Squibb Company (BMY) with a 5.9% yield, and Eli Lilly & Co. (LLY) with a 0.6% yield.

Conclusion

AbbVie Inc. did not earn any Stars in the Fair Value section, yet the stock earned two Stars in the Dividend Analytical Data section and one Star in the Dividend Income vs. MMA section, all for a total of three Stars. This quantitatively ranks AbbVie Inc. as a 3-Star Hold stock by my metrics.

Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $175.98 before the stock's NPV MMA Differential could decrease to the $500 minimum that I look for in a stock with 52 years of consecutive dividend increases (streak includes predecessor companies increases). At that price, the stock would yield 3.48%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 4.3%. This dividend growth rate is below the 4.8% used in this analysis, thus providing a small margin of safety. AbbVie Inc. has a risk rating of 1.25, which classifies it as a Low risk stock.

Like all pharmaceutical companies, AbbVie Inc. is faced with competition from generics, pricing restraints, and R&D related risks. The stock's Free Cash Flow payout of 50% (up from 44%) is within my acceptable range, while its Debt To Total Capital of 90% (up from 82%) is well above my desired maximum.

AbbVie Inc. has recently been trading above my calculated fair value of $154.49. I plan to continue watching the company's dividend fundamentals and allocation before adding to my position.

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