Is this company still a strong buy after tripling the return of the S&P 500?

While seemingly everyone is focused on artificial intelligence (AI) and tech stocks, other companies are quietly producing huge returns for investors. This is the case of the pharmaceutical giant AbbVie (ABBV -0.29%)which more than tripled the total returns of S&P 500 in the last three years.

ABBV Total Return Level data by YCharts

Here are several reasons why.

Why AbbVie is a great investment

AbbVie is known as the maker of the arthritis treatment Humira, the best-selling prescription drug of all time. Humira has grossed over $200 billion in all-time sales and is set to peak at over $21 billion in 2022. However, as you can see in the chart below, nothing lasts forever .

So what happened in 2023? Much less expensive biosimilars have been approved for sale, causing Humira sales to plummet for AbbVie. AbbVie’s management knew this was coming and has done a masterful job of diversifying the portfolio, starting with the 2019 acquisition of Allergan. Drugs such as Botox, Juvederm, Vraylar, Linzess and others have been added to AbbVie’s portfolio. In 2021, $11.4 billion, or 21% of total sales, were provided by Allergan’s portfolio products.

AbbVie also developed two other blockbuster drugs, Skyrizi and Rinvoq, which AbbVie expects to generate more than $16 billion in revenue this year and $27 billion in 2027. Finally, AbbVie continues to make strategic acquisitions, such as the recent acquisition of ImmunoGen and its commercial-stage cancer. treatment medicine, Elahere. AbbVie expects Elahere to be approved for additional treatments soon as well.

Because of these moves, AbbVie’s revenue hasn’t declined significantly, despite the loss of Humira exclusivity, as shown below (and it’s growing again).

ABBV Revenue (TTM) data by YCharts

It’s easy to see why AbbVie investors have done so well, but what about the years ahead?

Is AbbVie Stock a Buy Now?

Along with the above, AbbVie is an investor favorite as it has increased its dividend annually since inception. It currently pays $1.55 quarterly for a yield of about 3%. However, now may not be the best time to buy AbbVie stock. As shown below, the dividend yield is near a five-year low due to the recent rally in the share price.

ABBV dividend yield data by YCharts

The yield is also 34% below its recent average, suggesting that optimism is already baked into the stock. AbbVie is one of my most successful investments, but I only buy it when the dividend yield approaches 4%.

AbbVie is a great company and a great stock for income investors because of its consistently growing payout. However, the stock is best held for now as better times are likely to come for stock accumulation.