I have been surfing Seeking Alpha for ~10 years; I have been writing articles for Seeking Alpha for ~5. I have only recently started to fully explore the enhanced range of information it currently makes available on its platform.
In this article I am focusing on due diligence for dividend growth investors. I will use AbbVie as the exemplar, however the discussion should have application to the broad range of dividend stocks that Seeking Alpha covers. For Seeking Alpha newcomers this article can serve as a tutorial; for old hands it will hopefully provide interesting nuggets that have escaped their notice.
Seeking Alpha's opening AbbVie page is filled with dividend information, but it is just the beginning.
A copy of AbbVie's introductory page (1/7/21) is set out below; I have marked it with three numbered speech bubbles, as shown:
Bubble 1 is the first thing I always check, pointing to AbbVie's dividend yield on its price for the date of viewing. Bubble 2 points to an article in the "Analysis" section, "5%-Yielding AbbVie: Double-Digit Dividend Raise And A Buffett Endorsement."
It specifically addresses AbbVie's dividend, serendipitous yielding analysis, cites and comments directly relevant to a dividend-focused investigation. The extent of specific dividend discussion in dividend stock articles will vary. For most dividend stocks, even less dividend themed articles will provide useful color on issues of significance for dividend investors.
The first article listed in the screenshot above, "AbbVie's Fair Value Is At Least $147 Per Share," provides a perfect example. It sets out an excellent overview of AbbVie's investment merits focusing beyond its dividend. While both articles address Humira's pending competition, an issue of seminal importance for AbbVie investors, the Fair Value article provides a more comprehensive review.
Moving on to Bubble 3, Seeking Alpha's Dividend Grade quant panel is a feature routinely available for all dividend-paying stocks. Hovering a cursor over the question mark to the right of the panel's title yields the following explanatory drop down:
As noted at the bottom, FAQ information is available linking to the article, "A Game-Changer For Dividend Investors: Seeking Alpha's New Dividend Grades." Such article together with its numerous comments, including responses from quant founder Steve Cress, constitutes a significant resource for those conducting dividend related due diligence.
Seeking Alpha has an entire section for dividend investors that provides easily accessible and helpful information.
At this point it is time to access the section of Seeking Alpha's AbbVie coverage which is dedicated entirely to dividends as shown by the bubble below:
The first, the "Dividend Scorecard" screen, is particularly instructive. Its lead summary section lists the five dividend metrics of greatest moment to investors, yield, payment, payout ratio, growth rate and length of growth. The next, "Last Announced Dividend," frames the dividend with key timing data. The third and final portion sets out the applicable quant dividend scores discussed earlier, all as follows (for AbbVie on 1/8/20):
I have to confess this the "Dividend Summary" and "Last Announced Dividend" information provide details that I often find myself searching for on other sites, unaware that it is so readily available here on Seeking Alpha.
I will not set out the "Dividend Yield" or "Yield on Cost" pages; they include graphs and historical information which will be interesting to some but not the broad run of dividend investors.
The "Dividend Growth" page, on the other hand, I set out below in full. It provides information which directly informs the heart of the dividend growth enterprise. In the case of AbbVie it shows why it is so highly valued by dividend growth investors. Its growth metrics as shown by the dividend growth summary below are absolutely stellar:
The next in line, the "Dividend History" entry includes a chart, a graph and a table listing AbbVie's dividends back to 2016. The "Dividend Safety" page lists payout ratios and a chart. It also lists the ratio of net long-term debt to total assets and to EBITDA. I discuss this metric as it applies to AbbVie, in greater detail below.
After "Dividend Safety," the next topic heading is "Dividend News." These entries primarily consist of quarterly earnings announcements with rare additions, in one (3/20) case a Barron's article and in a second (8/19) a Goldman advice to clients.
AbbVie's past record of dividend payments is pristine; review of fundamentals confirms a positive outlook, albeit with appropriate vigilance.
The dividend aristocrats, a group of ~65 stocks in the S&P 500 Index that have increased dividends for >25 years, make up a kind of gold standard for dividend growth investors. There are sundry articles discussing these important stocks that one can access from various dividend subtopics accessible from Seeking Alpha's home page as shown below:
The subtopic that yields the most hits for "dividend aristocrats" is "Dividend Quick Picks." I located an article of particular relevance to my topic of due diligence for dividend investors by googling "dividend aristocrats Seeking Alpha."
The first reported article, "The 65 Dividend Aristocrats Ranked By Quality Score," shows the wide disparity that exists in evaluating dividend growth stocks.
There are six companies in the healthcare sector that qualify as dividend aristocrats. They are, with article ranked order [# and yield] in square brackets, Johnson & Johnson (JNJ) [#1-2.52%], Medtronic (NYSE:MDT) [#4-1.92%], Becton, Dickinson (BDX) [#24-1.30%], Abbott Laboratories (ABT) [#27-1.61%], Cardinal Health (CAH) [#50-3.48%], AbbVie (NYSE:ABBV) [#56-4.83%].
Now to be sure, AbbVie may rank as the red-headed stepchild of dividend aristocrats by one author's view, but its yield will make up for this for many investors. Chasing yield is, however, a dangerous proposition. Why is its yield so much higher? That is definitely a good question. Humira's upcoming LOE (loss of exclusivity) is one reason often considered for sure.
I submit that one of the metrics from the Dividend Safety page discussed above likely also plays a part. Its net long-term debt/EBITDA ratio >400% is approaching nosebleed territory for this metric.
I spot-checked it with each of the other six large-cap healthcare dividend stocks, Novartis (NVS), Bristol-Myers (BMY), Merck (MRK), Pfizer (PFE), Amgen (AMGN) and Sanofi (SNY), discussed in my recent article, "2 Top Picks - Safe High Dividend Biotechs For 2021." The closest any approached to AbbVie's >400% was Pfizer at ~200%.
AbbVie's outstanding long-term debt of >$82 billion is definitely an amount to watch. During AbbVie's Q3 2020 earnings call, EVP and CFO Michael addressed this issue as follows:
We also remain on track to pay down $15 billion to $18 billion of combined company debt by the end of 2021 and expect to achieve a net debt-to-EBITDA ratio of 2.5 times by the end of next year, with further deleveraging through 2023.
Conclusion
Investing is a challenge, particularly in our current fraught environment. From a retiree's viewpoint, I consider dividend growth investing as the area that promises the best combination of growth yield and safety. In no way am I advocating it as the sole approach to investing for retirement. I do believe firmly in diversifying my investments.
In this article I have worked to show how investors can use the Seeking Alpha platform to rationalize and enhance their dividend growth investing. I also submit that AbbVie is an excellent candidate to enhance the yield in a well-balanced dividend growth portfolio.
