An Underrated Premium Healthcare Stock

The healthcare industry is a complex system. Nevertheless, it's an exciting space filled with opportunities valued at almost $12 trillion globally.

Healthcare needs are practically guaranteed never to disappear. Moreover, there will always be a consistent demand for expansion and innovation as patients look for more effective treatments and therapies.

This could signify several up-and-coming budding companies in the following years.

However, it's vital to keep tabs on the well-established blue-chip stocks in the healthcare world.

After all, these names have proved their worth for decades, evolving with the industry and developing innovative drugs and services to stay at the forefront of the field.

One name that fits that description is Abbott Laboratories (ABT).

There are many reasons why Abbott is an outstanding stock to buy. One excellent reason is its long history, as it goes way back to the late 1800s.

Admittedly, that reason alone isn't enough to promise a bright future. But, the fact that Abbott managed to sustain its growth and remain competitive for decades speaks volumes of the stock's quality.

Another appeal of Abbott to investors, which is unlikely to change anytime soon, is its diversified portfolio. The company produces virtually everything from COVID-19 diagnostic tools to surgical equipment and medical devices targeting diabetes.

Moreover, Abbott has developed a solid relationship with healthcare professionals and facilities. This establishes brand recognition, which arms it with a decisive competitive advantage.

With over $43 billion in trailing 12-month revenue, its portfolio of products is so extensive and popular in the healthcare field that it's difficult to imagine a future where a particular failure in any market would severely damage its share price.

That makes AbbVie a remarkably safer stock compared to many of its peers in the healthcare sector.

The first three months of 2022 saw Abbott Laboratories record $11.9 billion in revenue, showing off a 13.8% year-over-year climb.

The diagnostic sales segment grew with a 32% increase year-over-year, with roughly $3.3 billion of the amount generated from COVID-19 diagnostic tools.

Apart from this, other segments of the business posted good numbers. For instance, the company's established pharmaceuticals and medical device sector climbed by over 7% in the first quarter.

The only business arm that failed to record an increase in revenue is its nutritional segment, which fell by 7% primarily due to product recalls and the unfavorable conditions in the Chinese market.

Although the quarterly revenue of Abbott isn't growing as fast as other healthcare companies, this shouldn't be an alarming concern.

Actually, this is effectively this industry titan's norm.

Besides, the moment a company reaches a market capitalization of more than $211.6 billion, it's challenging to continue making more money at a similar rate as the years when it was a smaller firm.

Meanwhile, a key revenue growth segment for Abbott is diabetes care.

Thanks to its FreeStyle Libre franchise, Abbott has established a notable presence in the diabetes market, particularly in the glucose monitoring (CGM) systems.

Based on the first-quarter report, sales from the diabetes segment jumped by 14.9% to record $1.1 billion.

From this, the FreeStyle Libre franchise raked in $1 billion in revenue, showing off an impressive 20.4% increase year-over-year.

CGM gadgets allow diabetes patients to conveniently and automatically track their own blood glucose levels. Evidently, the fast adoption of this technology is driving sales of the FreeStyle Libre.

Thus far, Abbott Laboratories is nowhere near entirely dominating the CGM market, with the likes of DexCom (DXCM) and Medtronic (MDT) still capable of contesting its market share.

Considering that this is only the first-quarter sales, though, it's incredible to watch how far the FreeStyle Libre franchise could go.

For context, this portfolio brought in annual revenue of $2.6 billion in 2020 and grew by 35.8% the following year to bring in $3.7 billion in 2021.

Finally, Abbott is an excellent option for income-seeking investors. This business is widely considered a Dividend King, increasing its payouts for an impressive 50 years.

Looking at the past five years, Abbott's dividend was raised by over 77%. Given its rapidly increasing cash flow, it's clear that it has a strong capacity to continue paying out dividends.

The market has been experiencing stomach-churning rough patches as more and more companies struggle with supply chain disruptions and increasing interest rates. This is just the kind of environment where Abbott thrives.

This company has a 10-year return of 378% that easily beats the market's 282%, making Abbott a stock that many investors aspire to own.

Between its steadily climbing dividend payouts, consistent flow of innovative products, and the capacity to hold its title as one of the largest healthcare companies worldwide, it's clear to see the reason for investors' confidence in this stock: all these benefits could make any shareholder wealthy over time.