New Buy – Bad Timing
New Buy – Bad Timing
Hey everyone. Hope life has continued to treat you great. Today I am writing you in regards to the newest purchase in our dividend portfolio.
I made the purchase on Friday and was thrilled with the buy and then Tuesday came around and now I’m happy but also kind of questioning it. Things have changed quite a bit in only a couple days…….
On Friday I decided to increase our position in Abbvie. (A massive pharmaceutical company) Early Friday the stock dropped to around 75 bucks but then started rebounding. I placed a order mid day to buy 15 shares at $76.95.
This buy added $64.20 to our forward dividends and brought our overall holding of Abbvie to 49 shares.
I bought because I continued to believe in their pipeline of drugs to fill the void that Humira’s revenue declines will create. Now I’m starting to wonder if management knows something that we don’t.
Most likely you have heard the news. Tuesday morning my twitter, facebook and yahoo finance were full of Abbvie talk. AbbVie would acquire Allergan Plc for about $63 billion. I really don’t like these massive acquisitions and have seen a bunch of different stocks tank after announcing deals like this. Well Abbvie’s stock price dropped %16.25 the day they announced this.
Arg why didn’t I wait to buy today? Haha you can’t time the market…. But I really wonder if I would of decided to purchase them after this dip.
I understand management is feeling the pressure to replace the income that Humira has been making and with patent protection expiring in 2023 for the United States something needed to happen. I was hoping the 2 drugs with great potential – Upadacitinib and Skyrizi would get approval and fill the void. But maybe management isn’t as confident after striking a deal to buy Allergan.
Allergan holders will receive 0.8660 AbbVie shares and $120.30 in cash for each share they hold. AbbVie will also take on Allergan’s debt, which totalled about $24 billion at the end of the first quarter.
More debt on the balance sheet….. and a lot of new shares issued.
This deal definitely helps fix the number one problem everyone has been talking about. Their reliance on Humira, Which generated sales of nearly 20 billion last year or 60% of abbvies revenue.
Allergan markets a portfolio of leading brands and best-in-class products primarily focused on four key therapeutic areas including medical aesthetics, eye care, central nervous system and Gastroenterology.(source – allergan website)
They are probably best known for botox though.
The deal still needs approval from regulators, but I think it should go through and is expected to close in 2020
How About that Dividend?
Stock price is kind of short term noise. I’m a dividend investor. Abbvie has been a great dividend growth company since it’s spin off of Abbott in 2013. Now there is a little worry in my head about what will happen moving forward…. Will the dividend still be safe? What about that dividend growth? On the conference call they reiterated the deal will help with dividend growth going forward. I’m not expecting those double digit increases though…
I have seen both General Mills and Cvs freeze their dividend after big acquisitions (Blue buffalo for general mills and Aetna for cvs) to help reduce their debt load.
Management has mentioned how they want to lower their debt levels by 15-18 billion by the end of 2021. Hopefully they will continue to increase their divided as well going forward.
This is a pretty huge acquisition. There is both positives and negatives to this deal. Are you a glass half full or half empty kind of person? While I could of gotten a better deal if I waited a couple more days before the purchase (2 more shares) who knew it was coming? You cant win them all!
At the end of the day we added 15 more shares and bumped those dividend’s up by $64.20. Not bad…
I have debated selling some of my cisco position and locking in a 85% gain and moving them over to Abbvie but for now I’ll just sit back and watch what happens. If its anything like GIS and CVS (after their acquisition or pending acquisition) the stock price will stay sideways for awhile.
What are your thoughts on this purchase and acquisition? Are you backing up the truck on the dip or staying away?
Hey I’m Rob, creator of Passive Canadian Income.
In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.