Drugmakers have consistent operations in any environment.
In 2020, for obvious reasons, there was a lot of attention on the pharmaceutical industry. While a few stocks like Moderna (ticker: MRNA) and Pfizer (PFE) have jumped thanks to their COVID-19 vaccines, long-term investors should be more interested in the large and stable drugmakers that throw off reliable income year after year. After all, a pandemic of this scale won’t happen every year, but chronic conditions like high blood pressure and diseases like cancer and Alzheimer’s have created big demand for new drugs. For massive companies that make up the global prescription drug industry, there is a measure of stability in any economic environment as patients pass up discretionary expense first and their medication last. That adds up to steady profits that fuel steady dividends, as evidenced by these nine leading pharma stocks.
AbbVie is as reliable as income investments come, with a track record of 49 consecutive years of dividend increases. It’s also paying out a generous yield right now that is more than three times that of the S&P 500. There’s a bit of product pipeline risk, as AbbVie’s top-selling drug Humira will lose patent protection in 2023 in the U.S. The drugmaker has already forecast a modest decline in future revenue as a result. However, it’s also forecasting a return to growth in 2024. That forecast, alongside a strong history of higher dividends, shows this is a pharmaceutical stock investors can depend on for the long haul.
Current yield: 4.95%
While Amgen hasn’t been in the headlines lately like some Big Pharma stocks with COVID-19 vaccines, it has been making plenty of news of a different kind. In March, the company acquired cancer-focused biotechnology company Five Prime Therapeutics for $1.9 billion to boost its oncology pipeline. That comes after a deal in 2019 to purchase a $2.7 billion stake in Chinese cancer biotech BeiGene, too. This has positioned AMGN as one of the preeminent cancer-fighting pharmaceutical companies on the planet, an area that will remain in high demand for years to come. Shares have been choppy in the last year, underperforming the S&P 500, but these deals hint that the future is bright for this drugmaker.
Current yield: 2.88%
AstraZeneca stock got a bit of bad news in 2021 as some European countries expressed concerns over its coronavirus vaccine and potential blood clots link — but the European Medicines Agency has said the benefits of the company’s vaccine outweigh the risks. What’s more, the long-term picture remains very bright thanks to its plan announced in December 2020 to acquire Alexion Pharmaceuticals in a $39 billion deal. The way of the world in Big Pharma is either get bigger or get squeezed by your competitors, and AZN is clearly committed to ensuring it has the scale and deep drug portfolio necessary to compete well beyond 2021.
Current yield: 2.89%
Bristol-Myers Squibb Co. (BMY)
Keeping with the theme of big-time acquisitions in Big Pharma, more than a year ago, BMY closed a massive $74 billion acquisition with high-growth biotech firm Celgene. A deal that size would have come with plenty of complications even in a normal environment, but integrating operations amid the pandemic made it an even more complex task. Yet now that the dust has settled, Bristol-Myers looks to be seeing significant top-line and bottom-line benefits. That’s on top of an already robust pipeline of drugs that includes blood thinner Eliquis, which saw double-digit growth in the fourth quarter, year over year, to tally more than $2 billion in sales. The $140 billion drugmaker has the scale and depth necessary to thrive over the long term, so investors can have confidence that shares will hang tough and dividends will keep rolling for many years to come.
Current yield: 3.17%
Gilead Sciences (GILD)
Not all tie-ups in pharma have to come with all those zeroes attached. Gilead recently won some great press after hooking up with competitor Merck (MRK) on a long-anticipated HIV drug deal. Both firms have long-acting maintenance medications, and they’re going to team up to test a combination treatment that provides better results. Considering GILD’s Biktarvy is one of the top HIV treatments in the U.S., this is only going to cement the drugmaker’s dominance in this category. It also has very lucrative hepatitis drugs, as well as Veklury, the first drug approved by the U.S. Food and Drug Administration to treat COVID-19. It all adds up to a bright outlook for the current portfolio in 2021, and a sign that GILD has what it takes to remain relevant in the long term.
Current yield: 4.41%
Johnson & Johnson (JNJ)
While not a pure pharma play, given health care conglomerate JNJ’s footprint in baby products and over-the-counter medication like Tylenol, the recent approval of a single-dose COVID-19 vaccine is proof that this company’s prescription medication is just as relevant as drugs from other firms in the space. For income-oriented investors, what’s really attractive is the long-term stability that this $420 billion stock offers. Aside from its unrivaled scale, JNJ is one of only two S&P 500 companies, along with tech giant Microsoft Corp. (MSFT), to have a perfect AAA credit rating and boasts $25 billion in cash on its books. Those factors will secure the company’s dividend for some time, regardless of the success of its vaccine in the short term.
Current yield: 2.51%
Novartis has struggled a bit since the beginning of the year, but its Kesimpta and Leqvio drugs have blockbuster potential that could ensure NVS gets its momentum back and then some in the years ahead. Kesimpta is an injectable treatment for multiple sclerosis, with high margins and the potential for regular refills thanks to patients needing steady maintenance doses. Leqvio has an even broader appeal worldwide, as a treatment for patients with high cholesterol. While the pandemic has disrupted some recent rollout plans, NVS continues to forge ahead — and patient investors might see the current lull as a buying opportunity before widespread approval and launch of some medications in the months ahead.
Current yield: 3.74%
Sanofi, based in France, isn’t your typical Big Pharma stock. The company doesn’t have the same recognition as some U.S. giants, and only pays dividends once a year — typically in late April or early May. But that makes the timing right to consider diving into this global drugmaker that has products treating a wide range of diseases including rheumatoid arthritis, cancer, diabetes and rare blood disorders. It also has a consumer health care division, providing over-the-counter products including Act dental care and Allegra allergy medications. This may not be the first stock you think of when you’re looking for drugmakers, but SNY offers income and stability for low-risk investors.
Current yield: 3.46%
Takeda Pharmaceutical Co. (TAK)
Tokyo-based Takeda is another global pharma company that you may not have heard of but should certainly keep on your radar. It is the largest pharmaceutical company in Asia by revenue, and one of the top 20 in the world by that measure. Its pharmaceutical products span gastroenterology, cancer treatments, neuroscience and rare diseases including blood disorders. This adds up to a dominant pharmaceutical company that is on par with other Big Pharma stocks on this list, and thus well worth a look if you’re interested in long-term income investments.
Current yield: 4.35%
Best pharmaceutical stocks to buy for income:
— AbbVie (ABBV)
— Amgen (AMGN)
— AstraZeneca (AZN)
— Bristol-Myers Squibb Co. (BMY)
— Gilead Sciences (GILD)
— Johnson & Johnson (JNJ)
— Novartis (NVS)
— Sanofi (SNY)
— Takeda Pharmaceutical Co. (TAK)
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Update 03/18/21: This story was published on an earlier date and has been updated with new information.