AbbVie (ABBV) ranks very highly using The 8 Rules of Dividend Investing.

The company’s stock has:

AbbVie’s stock is beaten down right now due to fears over the future of the company. The company’s stock is down ~15% over the last 6 months.

Normally, this is exactly the kind of investment I look for: A high quality dividend growth business that is undervalued.

As of the January 2016 Sure Dividend newsletter, AbbVie was ranked 5thoverall.

Here’s what I wrote about the company in the January 2016 Sure Dividend newsletter:

“This month AbbVie (ABBV) made the top 10 (it would have ranked 5th). I have removed it from the Top 10 because it generates 61% of its revenue from one drug (Humira) that goes off patent at the end of 2016. Qualitatively, the company is too risky for me to recommend in good conscience.”

The Problem with AbbVie

The problem with AbbVie stock is it generates ~60% of its revenue from one product; Humira.

Source: Drugs.com

Humira is a highly successful drug used to treat rheumatoid arthritis, plaque psoriasis, Crohn’s disease, ulcerative colitis, and other similar ailments.

For some businesses, generating the majority (or even all) of profit from one product is not bad – if that product is protected by a strong and durable competitive advantage. Think about how many company’s sell ‘coke-like sodas’ – yet none of them can touch Coca-Cola’s (KO) strong brand based competitive advantage.

AbbVie (and every other pharmaceutical company) protects its products with patents. Patents certainly provide a strong competitive advantage, but not a durable one. Patents expire at known intervals.

That’s where the risk with AbbVie comes in.

The company’s composition-of-matter patent for Humira expires at the end of 2016 in the United States. It expires in 2018 in Europe.