Surprise! This is the top healthcare stock of all time
Investing.com — Abbott Laboratories (ABT) has been identified as the top healthcare stock of all time for investors seeking consistent, long-term growth along with impressive quarterly dividends, according to new research by economist Hendrik Bessembinder.
The 135-year-old global healthcare company, which is headquartered in Green Oaks, Illinois, was ranked as the most profitable healthcare stock of all time and 11th overall in the research by Bessembinder, a professor and the Francis J. and Mary B. Labriola Endowed Chair in Competitive Business at Arizona State University.
According to the study, Abbott generated a staggering 7,803,730% in cumulative returns from 1 March 1937 to 29 December 2023. This would mean that a $100 investment in the company in 1937 would be now worth nearly $8 million.
Another interesting finding of the study was that annualized compound returns of the top performers were relatively modest, averaging 13.47% across the top seventeen stocks. In comparison, Abbott’s annualized compound returns stood at 13.85%, slightly higher than the average of the top seventeen stocks.
To be sure, Abbott has been not just one of the best-performing stocks but also a firm that has delivered dividend growth for 52 straight years to 2023. The December quarter of 2023 also marked the company’s 400th consecutive quarter in which it had paid a dividend to its shareholders since 1924.
The consecutive dividend payment places Abbott on the S&P 500 Dividend Aristocrat Index of companies that have raised their dividend payout for at least 25 consecutive years.
It is important to note that the company usually raises its dividend with the December announcement. It raised its dividend by 7.8% with the December 2023 results and by 8.5% the year before. It has raised its dividend by as much as 25% in recent years. So, based on the company's history of dividend hikes with December announcements, investors can expect another healthy dividend increase before the end of the year.
Abbott Laboratories reported strong results for the second quarter last month, with earnings per share (EPS) exceeding expectations at $1.14. The medical devices segment primarily drove the company's revenues of $10.38 billion. It reported double-digit sales growth in diabetes care, electrophysiology, and structural heart segments. Newly launched products such as Amplatzer® Amulet®, Navitor®, TriClip®, and AVEIR® also contributed to the strong performance. Following the results, the company’s board declared a quarterly dividend of $0.55 per share for Q2.
In response to these strong results, Abbott's full-year revenue guidance has been updated to an organic growth range of 9.5%-10%, and its adjust EPS guidance has been raised to $4.61-$4.71 from the previous $4.55-$4.70 range.
Abbott, which has been one of less than 50 companies that have managed to stay on the Fortune 500 list since its inception in 1955, has a broad portfolio that includes diagnostics, medical devices, nutritional products, and branded generic medicines.
The company, founded in 1888 by Chicago physician Wallace Calvin Abbott after he started producing accurate, scientifically formulated medications, employs nearly 114,000 people and operates in over 160 countries.
It markets popular nutrition products such as infant formula brand Similac, children's nutritional supplement PediaSure, foods and drinks that help manage blood sugar levels under the Glucerna brand, and electrolyte brand Pedialyte, among others.
In terms of medical devices and diagnostics, some of its notable products include glucose monitoring system FreeStyle, transcatheter mitral valve repair (TMVr) therapy MitraClip, family of diagnostic systems Alinity, and portable blood analysis system i-STAT 1.
In the recent past, the company has made several acquisitions to expand its play in the healthcare industry. For instance, it acquired Alere Diagnostics in 2017 for a whopping $5.3 billion. It had last acquired Cardiovascular Systems (NASDAQ:CSII), Inc. in 2023 for nearly $890 million.
The research ranked Altria Group Inc (NYSE: NYSE:MO) as the best-performing stock, with the highest cumulative compound return at 265528900.62% and the highest annualized cumulative return at 16.29% for the period 31 December 1925 to 29 December 2023.
Altria (erstwhile Philip Morris (NYSE:PM) Companies, Inc.), one of the largest producers and marketers of tobacco and cigarettes, was followed by Vulcan Materials Company (NYSE: NYSE:VMC). The producer of construction aggregates delivered the second-best cumulative compound return at 39349084.13% between 31 December 1925 and 29 December 2025, the research showed. Its annualized compound return stood at 14.05% and was the sixth-best in the lot.
The research placed Kansas City Southern (NYSE:KSU) in the third spot of best-performing stock with a cumulative compound return of 36175578.11% or 14.27% annualized compound return for the period between 31 December 1925 and 13 December 2021. The company, which traded on the NYSE exchange with the KSU ticker, was merged with the Canadian Pacific (NYSE:CP) Railway in 2023, with the merged entity becoming Canadian Pacific Kansas City Limited (TSE: CP).
Other non-healthcare stocks which delivered higher cumulative compound returns than Abbott in the research included General Dynamics Corporation (NYSE: NYSE:GD), Boeing Co (NYSE: NYSE:BA), International Business Machines Corp (NYSE: NYSE:IBM), Eaton Corporation PLC (NYSE: NYSE:ETN), S&P Global Inc (NYSE: SPGI), Coca-Cola Co (NYSE: KO), and PepsiCo Inc (NASDAQ: NASDAQ:PEP).
The research also pointed out that chipmaker Nvidia’s shareholders earned the highest annualized compound return at 33.38% for any stock with at least 20 years of return data.
However, this report, which analyzed compound return outcomes for the 29,078 publicly-listed common stocks contained in the CRSP database from December 1925 to December 2023, noted that 51.6% of the companies under review delivered negative cumulative returns.
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