Built For Droughts

Let me tell you about my neighbor’s irrigation system. Five years ago, he spent a small fortune installing drip lines throughout his property.

While everyone was comparing rose bushes and lawn ornaments, he was investing in a system that would never make the front page of the HOA newsletter but would save him a fortune.

Fast forward to today, and his water bills are practically nonexistent while his property value has quietly appreciated beyond anything flashy renovations could have delivered.

That’s Abbott Laboratories (ABT) in a nutshell – the kind of investment that compounds wealth while you’re busy living your life.

Abbott works like that irrigation system. It’s not Instagram-worthy, it’s not going to make you rich by Friday, but it’s the kind of strategic infrastructure play that builds generational wealth through steady, unsexy execution.

The company just dropped its Q2 numbers, and honestly, they were about as thrilling as a Tuesday afternoon. Normalized earnings per share came in at $1.26, right on target.

Revenue hit $11.14 billion, barely beating expectations by $84 million. The stock’s up about 31% since June 2024, which sounds impressive until you realize that’s over more than a year of grinding, steady performance.

But here’s where Abbott gets even more interesting to me. The company just declared its third dividend for 2025 at 59 cents per share, marking a 7.2% annual growth rate.

That might not get your pulse racing, but compound that over a decade and you’ll understand why patience pays.

The business itself tells a story that’s both encouraging and sobering.

Their medical device segment grew 13% this quarter, driven by diabetes care and heart failure products. These aren’t exactly cutting-edge AI breakthroughs, but they’re the kind of steady, essential healthcare needs that aren’t going anywhere.

People will always need blood glucose monitors and heart stents, in recession or boom times.

The challenges are real, though, and they’re the kind that test long-term thinking. Abbott is dealing with about $700 million in headwinds from fading COVID-19 test demand and pricing pressure from China’s bulk purchasing programs.

Add another $200 million in potential tariff-related costs, and you’re looking at nearly a billion dollars in near-term pressure.

The Trump administration’s pharmaceutical tariff proposals could push that higher if the industry doesn’t play ball on drug pricing.

As expected, this is where most investors panic and start looking for the exits. But this is exactly when Abbott’s dividend aristocrat status becomes your best friend.

For 52 consecutive years, this company has increased its dividend. Through recessions, wars, pandemics, and every market meltdown you can imagine, Abbott has kept writing bigger checks to shareholders every single year.

The valuation picture looks a bit stretched on traditional metrics.

The price-to-earnings ratio has climbed to about 27, well above the sector median and its own historical average. But if you take a moment to view Abbott from the perspective of a dividend investor, everything changes.

The current dividend yield of 1.76% sits right near the ten-year average of 1.81%. In other words, despite all the price appreciation, you’re still getting paid about the same rate you would have over the past decade.

Staying in the realm of unsexy-but-brilliant home investments, think of Abbott like installing solar panels on your house.

The upfront cost seems substantial, the payback period stretches over years, and your neighbors might question your timing when energy stocks are soaring. But 15 years later, while they’re still writing monthly electric bills, you’re banking the savings.

Abbott works the same way – it’s not about next quarter’s earnings surprise or this year’s breakthrough device.

It’s about owning a piece of infrastructure so fundamentally solid, so deeply woven into essential healthcare, that it’ll still be generating cash and growing dividends when today’s high-flyers are collecting dust.

The company’s pipeline promises new product launches over the coming years, and its core businesses in diagnostics, devices, and pharmaceuticals aren’t going anywhere. These aren’t disruptive technologies.

If anything, they’re the financial equivalent of infrastructure investments. Boring, essential, and quietly profitable year after year.

Abbott won’t turn you into a millionaire by next Tuesday, but check back in 10 years and you might be wondering why you didn’t buy more.

My neighbor with the irrigation system isn’t making speeches about his water bill at the block party, but his grass looks like Augusta National while everyone else’s lawn is auditioning for a Dust Bowl documentary.

In healthcare, excitement is overrated. Boring pays — and Abbott has made boring very, very profitable.