Motley Fool: Biotech company AbbVie offers healthy dividends

One of the best health care dividend stocks around belongs to biotech company AbbVie (NYSE: ABBV), which was spun off by Abbott Laboratories in 2013.

It has increased its dividend payout by about 60 percent since then and recently yielded a hefty 3.9 percent. You needn’t worry about the dividend evaporating anytime soon, as AbbVie uses only about 63 percent of its earnings to fund its dividend.

Sales for AbbVie’s top seller, the anti-inflammatory drug Humira, continue to increase, raking in more than $16 billion in 2016 – a year-over-year jump of nearly 15 percent. Humira generates more than two-thirds of the company’s revenue, making it a big target for competition.

AbbVie has other irons in the fire, too. The biotech’s cancer drug Imbruvica is selling well, raking in close to $2 billion last year and expected to more than double that revenue by 2020. AbbVie also has a solid pipeline – with several candidates, such as cancer drug Rova-T, autoimmune disease drug risankizumab and leukemia drug Venclexta, all having the potential to generate annual sales topping $1 billion. Corporate tax reform could give AbbVie a boost, too.

Analysts have projected average annual growth of more than 15 percent for AbbVie over the next few years. With its great dividend, great product lineup and great pipeline prospects, AbbVie is a biotech stock that investors should check out.

Ask the Fool

Q: I recently bought some stock. The shares rose for a while, but then started falling. Why can’t I find any explanation in the news? – K.W., Biloxi, Mississippi

A: The stock market – and individual stocks, as well – rarely goes up or down in a straight line. Stocks tend to go up on some days and down on others, but over the long term, sound stocks will appreciate. Sometimes stocks move in response to news about the company, the industry or the overall economy – and sometimes they move for no reason at all. Remember that the stock price reflects what people are willing to buy and sell it for at the moment – and sentiment can change quickly.

Don’t worry about short-term volatility. Focus on what you think the stock is really worth, ideally buying when it’s well below that and selling when it nears or passes that. Or just hang on as long as the company remains healthy and growing. The prices that matter are the price you bought at and the price you eventually sell at.

Q: What is the yield curve? – D.C., Philadelphia

A: It’s a little tricky to explain, but imagine a simple graph – with yield (measured in percentage points) on the vertical axis and maturity (measured in time) on the horizontal axis. You can take current U.S. Treasury bonds with maturities of three months, two years, five years and 30 years and plot their yields on the graph. Draw a line through all the points, and you’ll have a yield curve. If the curve is sloping upward, it’s considered a “normal” curve. It reflects higher interest rates for longer maturities, and suggests that rates may continue to rise.

My dumbest investment

Back in the early 1980s, I met a broker through friends, and in 1987, I agreed to let him manage my retirement account. He asked for full authority on the account, since he didn’t want to bother me each time he had an idea. I agreed, nervously. Remember that interest rates were still relatively high in 1987; many CDs were offering more than 7 percent.

One day he called to say he had put all of my money in a stock called virtual reality. This was supposed to be a hot stock in a new field, and we were in on the ground floor. He had all of his money in this stock, too. When I complained that this wasn’t what I had in mind, he guaranteed I wouldn’t lose money.

Well, the stock market crashed in 1987, and so did my stock in the still-unprofitable company. I lost all my money and my broker lost everything, too – including his wife and dogs.

I learned that I’m responsible for my own investments, that no one cares as much about my investments as I do, and that investing isn’t difficult if you’re conservative and have good reasons for each investment’s place in your portfolio. – M.A., online

The Fool responds: It’s always risky to put all your eggs in one basket – especially when it’s a new, unproven company. And when it comes to stock market investments, be wary of any guarantees.