Investing is often about playing the long game, hoping for returns greater than market averages. Abbott Laboratories (NYSE:ABT) has provided its shareholders with some intriguing insights on this front. With its stock price having risen by 31% over the last five years, it has trailed behind the broader market’s performance. It is noteworthy, though, the company saw its share price increase by 4.8% over the past year. Given this backdrop, it is worth analyzing the financial fundamentals behind this performance and the story of one of its most successful investors.
According to recent assessments, even with the share price rise, the company's earnings per share (EPS) growth has outpaced stock price gains. Specifically, Abbott’s EPS grew at a compound annual rate of 12% over the last five years, compared to the share price's growth of just 6% annually. This discrepancy suggests there might be some cautious sentiment surrounding the stock, as the market appears less enthusiastic about its valuation at present.
The financial metrics extend to dividends, which are often underappreciated when assessing long-term investment success. Total shareholder return (TSR), accounting for dividends reinvested, paints a more favorable picture for Abbott. The TSR for the last five years stood at 43%, significantly exceeding the mere share price gain. This growth can be attributed largely to the company's reliable dividend payments, rewarding investors for their patience.
Abbott's shareholders have seen their total investment grow by 6.9% over the previous year, which, sadly, underperforms the market average. Nevertheless, returns of nearly 7% per year over the last half-decade are encouraging signs of resilience as the business executes its growth strategy. Perhaps the stock price is simply stabilizing as the company navigates future expansion.
A perhaps more inspiring note about patient investing can be drawn from the remarkable story of Grace Groner, shared by Abbott on its website. Starting with her purchase of three shares of Abbott stock for $60 each back in 1935, Grace reinvested her dividends consistently for over three-quarters of a century. By the time she passed away at age 100, her investment had ballooned to $7.2 million. Abbott made sure to highlight her story as they celebrated their 101 years of dividend payouts.
The company’s post reads, "...we're remembering one of the earliest Abbott investing success stories, Grace Groner, who worked as a secretary at Abbott for over 40 years." Groner, having lived modestly—settling for one-bedroom homes and shopping at rummage sales—held on to her shares steadfastly, never selling even during multiple stock splits. She used her dividends to bolster her investment instead.
Her shares, which were worth around $28 million now, did more than inflate her fortune. Upon her death, she gifted her entire estate to support her alma mater, Lake Forest College, funding internships, international studies, and service projects for students. This legacy showcases how long-term investment strategies reap rewards beyond mere financial gain, impacting broader communities.
Today, Abbott's market value stands around $200 billion, placing it among corporate giants like Disney and PepsiCo. This growth is indicative of its resilience and sound management over the years. Evaluated through the lens of Groner's life, the company's growth speaks to the effectiveness of patience and sound dividend policy.
While dissecting Abbott's stock performance reveals some mixed sentiments about growth and investment, one thing remains clear: the long-term relationship between companies and their investors can yield remarkable stories, both financially and philanthropically. Groner’s inspirational legacy with Abbott not only highlights the power of reinvesting but emphasizes the far-reaching effects of diligent financial stewardship, proving once again how prudent decisions can lead to lasting success.
For those considering investing with Abbott Laboratories, the past demonstrates the potential for growth—both personal and corporate. It’s the antiquated adage of investing reminding us to think long-term, true” success lies far beyond immediate returns.
