The Dividend King That Keeps Growing It’s Kingdom

A Chicago lawyer named Russ Gremel walked into a brokerage in 1945 with $1,000 and a theory so simple it barely qualified as an investment thesis. He figured people would always need medicine and women would always buy makeup, so he bought shares in Walgreens (WBA) and promptly forgot about them.

Seventy years later, when he finally donated the position to a wildlife refuge, that $1,000 had metamorphosed into 28,000 shares worth $2.1 million. The position was spinning off $42,000 in annual dividend income, which means he was getting his entire original investment back 42 times every single year.

The man served in World War II and Korea, practiced law until he got bored, retired at 45, and spent the next five decades doing whatever he wanted while his Walgreens shares compounded in the background.

That’s not a fairy tale, that’s what happens when you understand how the pharmaceutical business actually works.

The secret isn’t finding the next miracle drug or timing patent expirations. It’s recognizing that demand for medicine is the most inelastic force in capitalism.

People cut back on vacations during recessions, they postpone car purchases during bear markets, but they don’t skip their prescriptions because the S&P 500 dropped 20%.

This fundamental truth creates an extraordinary moat that most investors completely misunderstand because they’re too busy chasing quarterly earnings beats and analyst upgrades.

Which brings us to AbbVie (ABBV), currently trading at $221 with a three percent yield. Wall Street expects the company to compound earnings at 15% annually over the next five years. Add those together and you’re looking at an 18% return if the valuation multiple stays flat.

So what separates AbbVie from the pharmaceutical also-rans? After Humira lost patent protection in the United States back in 2023, every analyst predicted disaster. Generic competition would crater revenues, the dividend would get slashed, and shareholders would flee for safer ground.

Except that management had spent the previous decade building a portfolio that could absorb the hit. Humira still generated $1.18 billion last quarter despite facing biosimilar competition, while the immunology franchise that now represents half of total revenues is growing at double digits.

When you hear that Skyrizi grew 62% and Rinvoq jumped 41%, those aren’t just impressive numbers. They represent compounds that survived a gauntlet that kills 95% of drug candidates and took a decade and several billion dollars to reach the market.

The dividend tells you everything you need to know about management’s priorities. Since spinning off from Abbott Laboratories (ABT) in 2013, AbbVie has increased the quarterly payout by 310%.

The current dividend sits at $1.64 per quarter, and when the board announces the annual increase this month, expect it to land around 6%. That might sound pedestrian compared to Microsoft’s (MSFT) recent double-digit hike, but here’s the difference.

Microsoft trades at a nosebleed valuation that assumes perfection for the next decade. AbbVie trades at 18 times earnings, maintains a 55% payout ratio based on adjusted earnings, and operates in a sector where demand never takes a holiday.

The Board runs an exceptionally conservative ship when it comes to capital allocation, and they have to. In an industry where you need to constantly pour money into research and development, you can’t operate with an eighty percent payout ratio the way tobacco companies do.

Even in the difficult years of 2023 and 2024, management still delivered dividend increases of 4.7% and 5.8%, respectively. This year should be better. Adjusted earnings guidance sits at $11.98 per share at the midpoint, which gives them plenty of room to bump the quarterly payout while maintaining that prudent ratio.

When you compare AbbVie to peers like Amgen (AMGN) and Gilead (GILD) on basic valuation metrics, it trades at a modest premium.

The price-to-sales multiple sits at 6.4 times versus 4.1 for Amgen and 4.8 for Gilead, while the earnings multiple shows a similar pattern at 18.3 times compared to 12.9 and 13.7 for the other two. But neither of them is a Dividend King with 50 years of consecutive increases stretching back through Abbott Laboratories.

They don’t have the same track record of acquiring and integrating major assets like the $63 billion Allergan deal. And they haven’t demonstrated the same ability to transition away from a blockbuster drug that was generating north of $20 billion in annual revenue at its peak.

While the risk factors aren’t trivial, they’re manageable. Every pharmaceutical company faces patent cliffs and pipeline execution challenges, and Humira proved that AbbVie can navigate that transition successfully.

Political risk around drug pricing reform surfaces every election cycle, and the recent White House tariff announcement on branded drugs manufactured overseas adds another variable. Currency fluctuations will continue to boost or dampen reported earnings, depending on dollar strength.

None of these risks is new, and more importantly, none of them change the fundamental thesis that a Chicago lawyer figured out 80 years ago with zero access to Bloomberg terminals or analyst reports.

The stock has compounded at better than 20% annually over the past five years, including dividends, which attracts skeptics who assume all the easy gains are behind us. They’re looking at the wrong metrics. The company is growing revenues at 6.5%, earnings per share jumped 12.1% last quarter, and management just raised full-year guidance.

The immunology franchise is firing on all cylinders, neuroscience is expanding at 24%, and the pipeline includes multiple late-stage candidates that could drive growth through the end of the decade.

Wall Street loves to overcomplicate investing, but sometimes the best opportunities hide in plain sight. AbbVie offers a 3% yield that grows at 7% annually, trades at a reasonable multiple for a stable business, and operates in a sector where demand is hardwired into human biology. That combination is increasingly rare in a market that routinely values unprofitable growth companies at 50 times sales.

Russ Gremel walked into that brokerage with $1,000 and a simple theory about medicine and makeup, then let compounding do the heavy lifting for seven decades. The formula hasn’t changed; it’s just that nobody has the patience to execute it anymore.

Set up the dividend reinvestment, tuck your AbbVie shares away, and check back in 2045. This one’s a keeper.