AbbVie: Is This Dividend Aristocrat Overbought Or Is There More Upside?

Trade Thesis for AbbVie Inc. (ABBV):

  • The stock is trading close to a 52-week high.
  • The stock's defensive nature and 4.4% dividend yield are attractive.
  • The best way to learn and master the Triple Income Wheel strategy is by repetition.
  • Strike Zone is $102.00 - $112.00

With the major indices hovering around all-time highs and the threat of Fed tapering looming, many investors are looking to add some defensive, stable dividend payors to their portfolio.

AbbVie certainly fits that profile (for the most part). 

AbbVie was spun-off from Abbott Laboratories (ABT) in 2013 as Abbott wanted to separate its research and non-research assets.  

The company has strong exposure to immunology and oncology and currently has a portfolio of 26 drugs (as well as a robust pipeline), including Humira, Imbruvica, and Lupron.  

However, one of the major risks that AbbVie investors face is product concentration (especially as patents expire). The company's most popular drug (Humira), which accounted for ~37% of sales in 2020, began losing patent protection in 2016.

Note that AbbVie acquired Allergan (the maker of Botox) in 2020 to help diversify its drug portfolio...and based on Q2 2021 numbers, the acquisition has reduced Humira's concentration down to 30% of sales.

That said, as long as AbbVie can continue to acquire existing drugs and bring its new drugs to market faster than its patents expire, the company should be in a great position in the long run.

Trade Analysis (Click the video below)

Cash-Secured Put Analysis

Risk/Reward Analysis

Risk/Reward Analysis

Based on your personal risk tolerance, consider the following cash-secured put options with various risk/reward profiles

Aggressive Portfolio

(target monthly yield = 1.5%-3.0%)


Base Portfolio

(target monthly yield = 1.0%-1.5%)

ABBV Oct 15th $115.00 Put

Price (Premium):  ~$2.10

Delta:  31

AMY%:  1.1%

MoS %:  3.8%

Conservative Portfolio

(target monthly yield = 0.5%-1.0%)

ABBV Oct 15th $110.00 Put

Price (Premium):  ~$1.05

Delta:  17

AMY%:  0.6%

MoS %:  8.0%

AMY % = Average Monthly Yield % / MoS % = Margin-of-Safety %

DISCLAIMER: Parsimony Investment Research and/or it's affiliates may or may not have a position in the stocks and/or options mentioned in this post at the time of publication. The information contained within this post is for informational and educational purposes only and it is not intended as a recommendation of the securities highlighted or any particular investment strategy; nor should it be considered a solicitation to buy or sell any security. The strategies and securities mentioned in this post may not be suitable for all types of investors and the information contained in this report does not constitute advice. Past performance is not a guarantee of future results. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker.