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ABT or SYK: Which Has Better Debt Management and Dividends?

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Dividend trends

On its fourth-quarter earnings conference call, Abbott Laboratories (ABT) guided for a dividend payout ratio of 40% or higher for future years. The company reported paying dividends worth $2.0 billion to shareholders in 2018. On December 14, 2018, the company issued a press release announcing a quarterly dividend of $0.32 per share, 14% higher on a sequential basis, that would be payable on February 15, 2019. Analysts expect Abbott’s dividend per share to rise 8.87% YoY (year-over-year) to $1.22 in 2019, 9.09% YoY to $1.33 in 2020, and 13.55% YoY to $1.51 in 2021.

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On December 4, 2018, Stryker (SYK) issued a press release announcing a dividend of $0.52 per share for the fourth quarter of 2018, a YoY and sequential rise of 11%, which was payable on January 31, 2019. Analysts expect Stryker’s annual dividend per share to change 11.55% YoY to $2.15 in 2019, 5.86% YoY to $2.28 in 2020, and -8.59% YoY to $2.08 in 2021.

Stryker is thus expected to return a higher absolute dividend per share to investors than Abbott Laboratories.

Debt coverage 

On its fourth-quarter earnings conference call, Abbott Laboratories guided for a net interest expense of $600 million in 2019. Analysts expect the company’s net interest expense to fall 15.19% YoY to $611.46 million in 2019, 8.83% YoY to $557.46 million in 2020, and 10.73% YoY to $497.67 million in 2021.

This falling interest expense trend is in line with Abbott Laboratories’ aggressive debt-repayment strategy. In 2018, the company repaid debt exceeding $8.0 billion. The company has total debt of $23.56 billion on its balance sheet and has a net debt-to-EBITDA ratio of 2.0x.

On the other hand, Analysts expect Stryker’s net interest expense to rise 1.33% YoY to $195 million in 2019, fall 7.31% YoY to $180.75 million in 2020, and fall 15.49% YoY to $152.75 million in 2021.

According to Stryker’s fourth-quarter earnings conference call, the company’s current debt is $9.9 billion, of which $1.25 billion will be repaid in the first quarter of 2019. The company’s current net debt-to-EBITDA ratio is 1.65x.

Stryker thus has a better debt coverage ratio than Abbott Laboratories.

Next, we’ll discuss Abbott Laboratories’ growth drivers in 2019.

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