Abbott Labs to announce dividend increase

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What's Happening

Healthcare company Abbott Labs ( ABT ) has a lengthy 44-year streak of dividend increases that it will likely extend this week. The stock has trended steadily higher through the year, and shares are currently up 39.3% on the year.

Technical Analysis

ABT was recently trading at $54.40, down $2.29 from its 12-month high and $16.50 above its 12-month low. Technical indicators for ABT are bullish and the stock is in a strong upward trend. The stock has recent support above $53.50 and recent resistance below $56.70. Of the 21 analysts who cover the stock, 12 rate it a "strong buy", two rate it a "buy", and seven rate it a "hold". DG gets a score of 75 from InvestorsObserver's Stock Score Report.

Analyst's Thoughts

Abbott is a true dividend aristocrat, with a nice 44-year streak of increases. The stock has a low 42.6% payout ratio, so the company can easily afford to extend its streak of annual increases. ABT currently has a yield of 1.95%, and pays a $0.265 quarterly distribution. Look for the payment to rise to around $0.28, which would translate to a 5.6% increase. Look for the announcement this week, with the stock trading ex-dividend mid-January.

Stock Only Trade

If you're looking to establish a long stock position in ABT, consider buying the stock under $54.50. Sell if it falls below $49.00 or take profits if it gets to $62.50.

Bullish Trade

If you want to set up a bullish hedged trade on ABT, consider a February 44/49 bull-put credit spread for a 25-cent credit. That's a potential 5.3% return (27.4% annualized*) and the stock would have to fall 9.5% to cause a problem.

Bearish Trade

If you want to take a bearish stance on ABT at this time, consider a February 60/65 bear-call credit spread for a 25-cent credit. That's a potential 5.3% return (27.4% annualized*) and the stock would have to rise 10.8% to cause a problem.

Covered Call Trade

If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a February $55.00 covered call. Buy ABT shares (typically 100 shares, scale as appropriate), while selling the February $55.00 call for a debit of $52.90 per share. The trade has a target assigned return of 4.0%, and a target annualized return of 21.0% (for comparison purposes only).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Originally published on InvestorsObserver.com

This article appears in: Investing , Options
Referenced Symbols: ABT

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