Just Four Days Till AbbVie Inc. (NYSE:ABBV) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see AbbVie Inc. (NYSE:ABBV) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase AbbVie's shares before the 14th of October in order to be eligible for the dividend, which will be paid on the 15th of November.

The company's next dividend payment will be US$1.30 per share, and in the last 12 months, the company paid a total of US$5.20 per share. Last year's total dividend payments show that AbbVie has a trailing yield of 4.7% on the current share price of $111.18. If you buy this business for its dividend, you should have an idea of whether AbbVie's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for AbbVie

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AbbVie distributed an unsustainably high 136% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. 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. Fortunately, it paid out only 45% of its free cash flow in the past year.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at AbbVie, with earnings per share up 3.5% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. AbbVie has delivered 14% dividend growth per year on average over the past nine years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has AbbVie got what it takes to maintain its dividend payments? 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. In summary, it's hard to get excited about AbbVie from a dividend perspective.

However if you're still interested in AbbVie as a potential investment, you should definitely consider some of the risks involved with AbbVie. For example - AbbVie has 4 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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.

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