It is hard to believe 2021 is all but over and 2022 is upon us. The Santa Claus rally has carried the S&P 500 back to new all-time highs and everything seems set up for a strong January. The reality is that five stocks have accounted for the bulk of the gains in the venerable index, and median price to earnings multiples are at the highest levels since the dot-com collapse in 1999 and 2000.
Now is the time to reduce risk for 2022 and move to safer ideas. Often when more conservative income investors look for companies paying big dividends, they are drawn to the Dividend Aristocrats, and with good reason. The 65 companies that made the cut for the 2021 S&P 500 Dividend Aristocrats list have increased dividends (not just remained the same) for 25 years straight. Yet, the requirements go even further. The following attributes are mandatory for membership on the Dividend Aristocrats list:
- Companies must be worth at least $3 billion at the time of each quarterly rebalancing.
- They must have an average daily volume of at least $5 million in transactions for every trailing three-month period at every quarterly rebalancing date.
With the potential for a sizable correction looming, and interest rates still at the generational lows, we thought it would be worthwhile to look for companies on the Dividend Aristocrats list that are in sectors that have underperformed in 2021 or are solid plays as investors continue to deal with both rising inflation and the potential for rising interest rates in 2022.
This is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June of 2019 it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of last year.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
Shareholders receive a 4.20% dividend. Wells Fargo has an Overweight rating and a $165 price objective. The consensus price target for AbbVie is lower at $132.97. The closing share price on Tuesday was $134.39.