This Health Care Dividend Aristocrat Will Profit From Old Age – Globally

Abbott’s Compelling Price to Value Proposition

Abbott Labs has historically traded for around the same price-to-earnings multiple as the S&P 500 since the AbbVie spin-off in 2012.

– Abbott Labs average price-to-earnings ratio of 19.1 (2013 through 2015)

– S&P 500 average price-to-earnings ratio of 19.3 (2013 through 2015)

I don’t believe Abbott Labs should trade for the same price-to-earnings multiple as the S&P 500…

The company is of a higher quality than the average S&P 500 stock.  It also has better total return prospects than the average S&P 500 stock.

The market disagrees at this time. Abbott Labs’s price-to-earnings ratio has not followed suite with the S&P 500’s.

– Abbott Labs current price-to-earnings ratio of 18.7

– S&P 500 current price-to-earnings ratio of 24.2

I believe Abbott Labs should trade at least in line with the S&P 500. Relative to the market, Abbott Labs is significantly undervalued today.

Relative to its historical average price-to-earnings ratio, the company is likely trading around fair value. Taken as a whole, I expect an investment in Abbott Labs to beat the S&P 500 Index over the next 5 to 10 year period.

Abbott Labs Is a Buy at Current Prices

Investors in Abbott Laboratories should expect total returns of around 12% to 13% a year going forward from dividends and earnings-per-share growth…

An investment that grows at 12% a year doubles in value about every 6 years.

The company scores high marks for safety and will very likely continue increasing dividend payments far into the future.

Additionally, Abbott Labs gives investors lower risk exposure to emerging markets.

The company currently ranks as a Top 10 dividend stock using The 8 Rule of Dividend Investing.

Abbott Labs ranks highly using The 8 Rules because it has:

– An above average dividend yield of 2.7%

– Above average expected earnings-per-share growth of 10% per year

– Reasonable payout ratio of 50%

– Lower than average stock price standard deviation of 20.1%

I believe Abbott Laboratories (NYSE:ABT) is an excellent example of a high quality, shareholder friendly business trading at fair or better prices now.

Investors looking for exposure to the health care sector and/or emerging markets should look no further than Abbott Labs.

Want more high quality health care stocks? Click here to download a data-filled spreadsheet of all 13 health care sector stocks with 25+ years of dividend payments – ranked in order using The 8 Rules of Dividend Investing.

Disclosure: None