AbbVie Inc. (NYSE:ABBV) was trading at around $263 on October 5, up 14.18% over twelve months. Its payout ratio is 190.40%. The company distributes nearly twice what it reports as profit.
A dividend that large is either about to be cut or is being paid out of something the earnings line does not show.
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AbbVie reported net income of $6.27 billion and generated $16.87 billion of free cash flow. Dividends are paid from the second number, so a ratio measured against the first is describing depressed earnings rather than a company living beyond its means.
The margins show what depresses them. Operating margin is 40.04%. Net margin is 9.80%. Thirty points vanish between those lines, and where they vanish matters. Costs that high sitting below the operating line are not the business failing to earn. They are the amortization of a drug portfolio AbbVie bought rather than discovered, plus interest on the debt that bought it.
#paid
A dividend that large is either about to be cut or is being paid out of something the earnings line does not show.
READ ALSO: Here is Why Tripadvisor (TRIP) is a Bad Investment at Today's Price
AbbVie reported net income of $6.27 billion and generated $16.87 billion of free cash flow. Dividends are paid from the second number, so a ratio measured against the first is describing depressed earnings rather than a company living beyond its means.
The margins show what depresses them. Operating margin is 40.04%. Net margin is 9.80%. Thirty points vanish between those lines, and where they vanish matters. Costs that high sitting below the operating line are not the business failing to earn. They are the amortization of a drug portfolio AbbVie bought rather than discovered, plus interest on the debt that bought it.
#paid
4 hours ago
