Dividend Stocks to Avoid: Risks Ahead for ABBV, MDT, PFE

Investors are cautious about AbbVie, Medtronic, and Pfizer due to shaky dividend outlooks. With high payout ratios and declining net income, their ability to maintain dividends raises concerns for future returns. Market conditions urge caution for dividend-seeking investors.

Date: 18-05-2025

AI Rating: 4

**Dividend Payout Challenges**
The analysis highlights potential risks associated with three notable dividend-paying stocks: AbbVie (ABBV), Medtronic (MDT), and Pfizer (PFE). Each company faces significant challenges that can impact stock prices, particularly through their dividend sustainability.

**AbbVie (NYSE: ABBV)**
AbbVie has maintained dividends for 11 consecutive years; however, its payout ratio has surged to an alarming 266%. This high ratio indicates that the company is paying out more in dividends than it earns, fueled by a drastic drop in revenue driven by the loss of exclusivity for its product Humira, which saw sales plummet by 51%. Furthermore, AbbVie's net income significantly decreased to $4.2 billion, down 69% from previous highs. This decline, alongside rising debt levels, puts the viability of its dividend into serious question.

**Medtronic (NYSE: MDT)**
Medtronic's dividend record is commendable with 47 consecutive years of paid dividends. Yet, the current payout ratio is at 84.7%, coupled with a slight decline in net income to $1.29 billion. This stagnation in net income growth despite increasing revenue underscores potential financial strain. Notably, the company’s recent debt levels and competitive pressures may also lead to adverse impacts on its ability to increase or maintain dividends in the near future.

**Pfizer (NYSE: PFE)**
Pfizer is at a pivotal moment, with a payout ratio of 121.5%. This concerning metric follows an 8% decline in revenue, largely due to reduced sales of its COVID-19 product, Paxlovid. Although the company has committed to heavy spending on R&D to discover new breakthrough drugs, its ability to sustain high dividends remains in question. Additionally, a significant amount of net debt ($44 billion) and halted share repurchases could further risk future dividends.

**Outlook for Investors**
The high yields on these stocks are tempting for dividend-seeking investors, but the concerning financial metrics, including high payout ratios, declining net income, and growing debt, suggest caution. The historical tendencies of stocks that cut or pause dividends typically result in downward price pressure, which should compel investors to reassess their willingness to hold these stocks in the current market environment.

Stocks: ABBV MDT PFE