S&P 500 Dividend Aristocrats List: Top 10 Picks by Hedge Funds

7. Abbott Laboratories (NYSE:ABT)

Number of Hedge Fund Holders: 70

An American multinational healthcare company, Abbott Laboratories (NYSE:ABT) is next on our list of the best dividend aristocrat stocks. The company was a part of 70 hedge fund portfolios in Q1 2023, up from 60 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a collective value of over $2.37 billion.

Abbott Laboratories (NYSE:ABT) offers a quarterly dividend of $0.51 per share for a dividend yield of 1.98%. The company has raised its dividends for 51 years without interruption.

Polen Capital mentioned Abbott Laboratories (NYSE:ABT) in its Q1 2023 investor letter. Here is what the firm has to say:

“As stated below in the portfolio activity section, Abbott Laboratories (NYSE:ABT) is expected to see roughly $6 billion in COVID test sales evaporate this year, creating a headwind for margins and underlying earnings per share. As long-term owners of the business, these test sales were never part of our original investment case. The core business, our primary focus, has a clear path of growing high single digits in 2023 with durable growth beyond, in our view. We believe the current price of 23x NTM P/E , while reasonable, is also misleading considering earnings this year will be artificially depressed because of the drop in COVID testing sales. On normalized earnings, the price is lower. We anticipate underlying EPS growth of at least low-teens over the next three to five years.

Lastly, we trimmed Abbott Laboratories, bringing it back to a more average position size and to also fund our increase in Thermo Fisher. Abbott is entering a year in which the company is expected to see approximately $6bn in COVID-19 test sales disappear, thus, creating a headwind for margins and EPS. That said, the core business has a clear path to growing high single digits in FY23. EPS grew at a 20% CAGR from 2019-2022, far beyond our expectations when we initiated our investment. Now, we expect a more normal growth rate of low teens EPS beyond this year. Further, management’s adeptness at allocating capital continues to impress us. We expect Abbott to drive top line growth without heavily investing in R&D and SG&A this year— management effectively “front-loaded” those investments in 2021 and 2022 when COVID test sales created a bolus of cash. We believe this should allow for leverage on the operating margin going forward. Combined, Abbott and Thermo Fisher now represent 7% of the Portfolio.”