In favorable financial environments, even mediocre firms are in a position to develop their dividends. However when the going will get robust, it could be time to deal with Dividend Kings. These are probably the most confirmed dividend-paying shares as a result of they’ve demonstrated a capability to lift their payouts for at the least 50 years. A half a century is such a protracted time frame that it just about ensures an organization has raised its dividend by means of at the least a number of recessions.

With 50 consecutive years of dividend development, healthcare big Abbott Laboratories (ABT 0.90%) is a Dividend King. Is it a purchase for revenue traders proper now? Let’s dig into its fundamentals and valuation to get a solution.

A confirmed observe report of defying analysts’ expectations

In late July, Abbott Laboratories shared its monetary outcomes for the second quarter ended June 30. The healthcare firm as soon as once more topped common analysts’ expectations. 

Abbott reported $11.Three billion in gross sales throughout the second quarter, which was 10.1% increased than the year-ago interval. This handily surpassed the analyst gross sales consensus of $10.Four billion for the quarter. And it was the ninth quarter out of the final 10 quarters that the corporate has finished so.

As was additionally the case within the earlier quarter, Abbott’s diet section was the one section to not log year-over-year gross sales development. Gross sales for the section declined 7.4% 12 months over 12 months to $2 billion within the second quarter. That is as a result of the corporate issued a voluntary recall and manufacturing shutdown on a few of its child method merchandise at a U.S. plant again in February. The excellent news for the section is that its plant began manufacturing again up in July, so outcomes ought to get well.

Abbott’s large gross sales development within the second quarter was once more pushed by sturdy demand for its COVID-19 fast assessments within the diagnostics section. This powered the section’s income 33.1% increased over the year-ago interval to $4.Three billion for the quarter. Regardless of COVID-19 surges in markets around the globe and lockdowns in China, the corporate’s medical gadgets section gross sales edged 2.5% increased to $3.Eight billion throughout the second quarter. And the established prescribed drugs section was in a position to improve its gross sales by 3.7% 12 months over 12 months to $1.2 billion within the quarter.

In the meantime, non-GAAP (adjusted) diluted earnings per share (EPS) soared 22.2% increased over the year-ago interval to $1.43 throughout the second quarter. This was considerably greater than the $1.09 that analysts have been anticipating for the quarter. How did the corporate handle to beat expectations for 10 quarters in a row? 

Other than Abbott’s increased gross sales base, the corporate’s non-GAAP web margin elevated by 190 foundation factors 12 months over 12 months within the second quarter. Together with a 1.6% decline in its diluted excellent share depend to 1.Eight billion, this explains how earnings development far outpaced gross sales development for the quarter.

As COVID regularly wanes over time, this may doubtless be a headwind to Abbott’s gross sales and income. However analysts count on that the corporate’s innovation will result in 11% annual earnings development over the following 5 years.

Picture supply: Getty Photographs.

The dividend ought to hold chugging alongside

Abbott boasts a 1.7% dividend yield, which is barely above the S&P 500 index’s 1.5% yield. And sturdy dividend development ought to persist within the years forward for the Dividend King. 

It’s because the corporate’s dividend payout ratio shall be round 37% in 2022, which permits it to retain the capital needed for share repurchases, debt discount, and acquisitions. Because of this, I consider high-single-digit annual dividend development will happen over the medium time period. 

A world-class firm at a wise valuation

Abbott Laboratories is arguably among the many finest companies on the planet. And the inventory’s valuation would not totally mirror this actuality.

That is evidenced by Abbott’s ahead price-to-earnings (P/E) ratio of 23.6. For context, that is slightly below the medical gadgets trade common ahead P/E ratio of 24.8. That is why I am satisfied that revenue and worth traders should purchase this dividend development inventory for his or her portfolios.