3 Pharma Stocks With Especially Juicy Dividends
Big pharmaceutical companies usually make big bucks. And many of them return a portion of their profits to investors in the form of dividends.
We asked three Motley Fool contributors to pick the pharma stocks that they think have especially juicy dividends. Here’s why they chose AbbVie (NYSE:ABBV), Gilead Sciences (NASDAQ:GILD), and Pfizer (NYSE:PFE).
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A Dividend Aristocrat that’s performing well
Keith Speights (AbbVie): There’s so much to like about AbbVie’s dividend that it’s hard to know where to begin. But I’ll start with its attractive yield of 4.2%. What’s even better, though, is that AbbVie is a Dividend Aristocrat — an elite group of S&P 500 members that have increased their dividends for at least 25 consecutive years.
Unlike some dividend stocks, AbbVie has also delivered strong growth lately. Its shares soared 26% last year. With dividends included, the drugmaker’s total return easily beat the S&P 500’s performance.
There are a couple of concerns for AbbVie, though. The U.S. Food and Drug Administration (FDA) recently placed additional warnings on the company’s JAK inhibitor Rinvoq. This could limit the sales of the drug to some extent. Also, AbbVie’s top-selling drug Humira faces biosimilar rivals in the U.S. beginning in 2023. Sales are expected to decline significantly.
However, AbbVie’s dividend shouldn’t be threatened at all. The company could also continue generating solid growth in the second half of this decade after the initial impact of Humira losing exclusivity. AbbVie has several other growth drivers, including autoimmune disease drug Skyrizi and blood cancer drug Venclexta.
This biotech has boosted its dividend 51% in five years
David Jagielski (Gilead Sciences): Investing in a high-yielding dividend stock can be a great way to make the most of your money. But to ensure that inflation isn’t chipping away at that cash flow over time, you’ll also want to invest in a company that raises its dividend payments. With Gilead Sciences, investors are getting the best of both worlds — a high yield of around 4% that has also been growing over the years.
Five years ago, Gilead was paying its investors a quarterly dividend of $0.47. Today, those payments are up to $0.71, rising by 51% during that time and averaging a compound annual growth rate of 8.6%. And that already-juicy dividend can get even more mouth-watering as the company’s payout ratio sits below 50%.
In Gilead’s latest quarterly update, sales rose 13% year over year to $7.4 billion. The company also reported net income of $2.6 billion, which equated to a per-share (diluted) profit of $2.05. And in the nine months leading up to that date, the earnings per share (EPS) topped $4.63. That’s easily enough to cover the current dividend, which on an annual basis would total $2.84. And it leaves room for some generous increases as well.
Now may be an optimal time to buy Gilead stock. The company…