AbbVie Inc. (NYSE:ABBV) Goes Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that AbbVie Inc. (NYSE:ABBV) is about to go ex-dividend in just 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, AbbVie investors that purchase the stock on or after the 12th of January will not receive the dividend, which will be paid on the 15th of February.

The company's next dividend payment will be US$1.55 per share, and in the last 12 months, the company paid a total of US$5.92 per share. Looking at the last 12 months of distributions, AbbVie has a trailing yield of approximately 3.8% on its current stock price of $162.14. If you buy this business for its dividend, you should have an idea of whether AbbVie's dividend is reliable and sustainable. As a result, readers should always check whether AbbVie has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for AbbVie

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. AbbVie distributed an unsustainably high 162% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 42% of its free cash flow as dividends, a comfortable payout level for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and AbbVie fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see AbbVie earnings per share are up 2.1% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, AbbVie has lifted its dividend by approximately 15% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is AbbVie an attractive dividend stock, or better left on the shelf? Earnings per share have grown modestly, and last year AbbVie paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you're not too concerned about AbbVie's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 4 warning signs for AbbVie that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.