There's a soft spot in my heart for this one...

 
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Editor's Note: Below, Chief Income Strategist Marc Lichtenfeld puts one of his favorite past trades under the microscope to assess its current dividend safety.

This 4.7% yielder from the healthcare sector has delivered for Marc's readers before - to the tune of 2,381% in 10 months on its options.

But Marc wants even better for readers of his biotech research service, Lightning Trend Trader.

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A Safe 4.7% Yield in Biopharma

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

You're not supposed to get emotionally attached to stocks. They're simply investment vehicles - ways for your money to work for you.

But I'll always have a soft spot in my heart for AbbVie (NYSE: ABBV). Not only does it pay a great dividend, but it's the stock with which I had my greatest trade. The options I recommended rose 2,381%, and one Oxford Club subscriber told me he made $1.3 million.

So you can understand why I'm fond of the stock.

But that was yesterday. Today, we're focusing on AbbVie's 4.7% yield and whether it can continue to pay shareholders the current dividend.

AbbVie is a large biopharma company with the bestselling drug in the world: Humira. AbbVie's biotech cancer fighter Imbruvica generates $5 billion a year in revenue, and the company has several other blockbusters (drugs with $1 billion a year in sales).

Does all that revenue mean AbbVie can keep paying its dividend?

From a SafetyNet Pro perspective, AbbVie is nearly perfect.

What Is SafetyNet Pro?
SafetyNet Pro is a groundbreaking tool that predicts dividend cuts with stunning accuracy. With it, you can determine the dividend safety rating of nearly 1,000 stocks. Access to SafetyNet Pro is reserved exclusively for subscribers of Marc's newsletter, The Oxford Income Letter.
 

In 2019, AbbVie's free cash flow was $12.77 billion, a hair below the prior year's $12.79 billion. SafetyNet Pro does not like to see free cash flow decline, no matter how small the infraction.

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However, now that 2021 has begun, the one-year decline will age out when AbbVie reports full-year 2020 results, which are forecast to be $19.1 billion. This year's total should be even higher.

Even with the slightly lower free cash flow total in 2019, AbbVie had more than enough to afford the $6.4 billion in dividends that it paid.

That figure is expected to have grown to $8.4 billion in 2020, which is just 44% of projected free cash flow. (Anything below 50% is considered quite safe.)

Chart - Free Cash Flow Easily Covers the Dividend
 

AbbVie was spun out of Abbott Laboratories (NYSE: ABT) in 2013. It has paid and raised its dividend every year since, so its dividend-paying history is short but solid.

AbbVie should have absolutely no problem paying and raising its dividend in 2021. And I expect it will be upgraded to SafetyNet Pro's highest rating in a few weeks once the 2020 results are in.

Dividend Safety Rating: B

Dividend Grade Guide
 

If you have a stock whose dividend safety you'd like me to analyze, leave the ticker in the comments section.

You can also search the Wealthy Retirement website to see whether I've written about your favorite stock before. Simply type its name into the search bar below.

Good investing,

Marc

P.S. A 2,381% partial options gain is pretty remarkable - but I'm planning to beat that record in 2021.

This time, I want to show my subscribers the chance at 3,000% in a year.

But here's the catch - this is the only way you can get in at this offer. So you have to act fast.

Click here for the details.

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