In her The MoneyPaper, editor Vita Nelson looks to stocks offering dividend reinvestment plans. Here, she highlights Abbott Laboratories (NYSE: ABT) as a featured holding in her model portfolio.
"Abbott is a diversified, multinational, health care firm.The shares have not responded to the recent stock market rallies in part due to the defensive nature of health care stocks.
"Uncertainty regarding health care reform is also a factor in the static share price of recent months. ABT shares are now trading below 11 times 2010 earnings estimates, compared with about 15 for the S&P 500.
"So the stock is trading at a discount of almost 30%. Historically, ABT shares have traded at a premium to the S&P.
"The firm enjoys a number of growth platforms and has moved into the #3 position in coronary stents, has a major product in the biologic Humira, and has developed a strong business in nutritionals in emerging countries.
"The acquisition of an industry leading franchise in ophthalmology was recently added to its arsenal of products.
"Abbott recorded strong earnings in the first half of 2009, with sales up only slightly to $14.2 billion, due to unfavorable currency effects and generic competition for certain drugs. But double-digit earnings per share growth is expected in 2009 and 2010.
"With an attractive 3.6% dividend yield (and a record of 37 consecutive annual increases), favorable growth prospects, and a diverse revenue base, the shares are an excellent choice for the conservative, long-term investor."
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