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Can Investing in ABV Bring You $10,000 in Annual Dividend Income by Retirement?

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An easy way to increase your income is through dividend stocks. Since they pay you back a percentage of your investment every quarter, you receive regular cash and you don’t even have to sell your investment. If you invest in dividend-growth stocks, you may even see your income increase over the years as the company increases its payout.

A good example of a growth stock with a top dividend is a healthcare company. alc (ABBV -0.25%). The drugmaker behind the popular arthritis drug Humira has an excellent track record of paying and growing dividends, and below I’ll show you how much you need to invest in stocks today to get your annual dividend income up to $10,000 after retirement. should happen.

AbbVie is an Elite Dividend Growth Stock

AbbVie’s dividend yield is 3.8%, which is a whopping 2 percentage points higher than AbbVie’s. S&P 500 Average 1.7%. But the real profit you get from investing in stocks is buying and holding. That’s because AbbVie is also a dividend king, meaning it’s been increasing its dividend annually for more than 50 years (including when it was still a shareholder). Abbott Laboratories,

Last month, AbbVie announced a 5% increase in its quarterly dividend that would pay shareholders $1.48 per share through February 2023. That’s more than double the $0.71 the company paid in early 2018. About 16%.

However, the high growth rate is not sustainable, as evidenced by AbbVie’s most recent rate increase of a more modest 5%.

Here’s how AbbVie shares can boost dividend income to $10,000

If you want to keep AbbVie’s stock and let the company grow its dividend payout by 5%, it could take 14 years or more for the payout to double.

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Obviously, this is a huge assumption that the dividend grows at exactly 5% each year, which is totally unlikely. As the company continues to grow and expand its business, there could be a mix of high and low dividend growth along the way. There is also the risk that dividend growth will stop altogether. While it may seem impossible today, it’s important to remember that these payments are never guaranteed.

But if the company were to increase dividends by 5% (on average) per year, here’s how much you would need to invest today to receive $10,000 in annual dividend income in retirement:

Chart by author.

This is based on the assumption that you buy the stock for $158, which it was trading for on Monday. As always, the earlier you invest and the more investment years you have left before you retire, the less money you need to invest today. The lowest investment amount, $48,385, would take 35 investment years to retire for this strategy to be successful. Here’s how the dividend income from that investment will add up over the years:

Chart by author.

Unless you have a large portfolio where you can justify putting more than $48,000 into a single stock, investing in ABV alone may not be a good fit for this strategy. Instead, you may want to spread that total investment amount across several dividend stocks with returns and track records similar to AbbVie’s.

A good stock to own for the long term

AbbVie is a growing company that rewards its shareholders with its expansion, and that gives investors enough incentive to keep investing not just for years, but for decades. And today it trades at just 14 times its future earnings — the healthcare average is about 17.

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David Jagielski has no position in any of the listed stocks. The Motley Fool has no position in any of the listed stocks. The Motley Fool has a disclosure policy.

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