Big pharmaceutical stocks are appealing because they provide medicines that people rely on to improve their quality of life, and therefore will likely not cut back on regardless of the economic environment.
Furthermore, with the ever-rising cost of healthcare in the U.S., it seems a foregone conclusion that new drugs developed by pharmaceutical companies will be steep in price – and generous in profit margins as a result.
Some traders piled into
amid the pandemic in
hopes of playing the
dividend investors are
familiar with this sector because drugs that make your body hurt less and prolong your lifespan are likely to be prioritized in your daily budget. That means reliability in revenue to provide stable share prices and support generous dividends.
These 'dividend aristocrats' have paid and increased their dividend every year for 25-plus straight years.
2021's Dividend Aristocrats list: All 65 stocks
These 10 blue-chip stocks, true to their name, are holding steady so far this year.
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Pay secure, typically well-covered dividends.
Raise their payouts regularly without interruption.
Offer the potential for much more significant price gains than bonds typically deliver.
Each offers a
dividend yield that's
at or above the market average, and they all deliver consistency that buy-and hold investors can appreciate.
To help answer that
question, we looked
at the full list of
through the lens of
the Stock News
POWR Ratings System.
We then narrowed our
focus down to only those Aristocrats
receiving a Strong Buy rating from the
pros based on the company's current
financial situation and future prospects.
Based on those criteria, here are the five best Dividend Aristocrats for investors looking to beef up their income portfolios.
As far as pharmaceutical stocks go, AbbVie (ABBV) has put in a strong performance since its March 2020 lows near $65, with the shares up 68%. More recently, an August rally lifted ABBV stock back near its 2018 highs above $120 thanks to strong financials and product development news.
Market value: $192.1 billion
Dividend yield: 4.8%
Specifically, ABBV's second-quarter results showed revenue of about $14 billion, up more than 19% on an operational basis over the prior year, with a 32.9% year-over-year improvement in adjusted earnings to $3.11 per share.
AbbVie's earnings were
driven in part by
continued resilience of
its Humira drug revenue,
despite a loss of European
patent protection a few
years back. Strong growth
for drugs Skyrizi and
Rinvoq that treat autoimmune disorders also contributed, with each seeing sales rise by double-digit percentage points on a sequential basis.
Beyond this earnings momentum in August, long-term income investors should have a lot of faith in ABBV stock looking forward, too. Born out of a 2013 spinoff from Abbott Laboratories (ABT), AbbVie's roots go back more than 130 years – including an enviable track record of 49 consecutive years of dividend increases.
Heading into 2022, AbbVie is looking particularly strong on the heels of a $63-billion acquisition of Allergan in 2020 that is now largely integrated into operations and starting to show up in the bottom line.
One particularly interesting angle here is Allergan's Botox cosmetics line. Sales of the anti-wrinkle injection doubled in Q2, and are forecast to see a big boost as remote working and social distancing trends start to wane amid COVID-19 vaccinations and general reopenings.
The POWR Ratings system gives Abbott Laboratories an overall grade of A (Strong Buy), due in part to its Growth Grade of A. In the most recent quarter, adjusted earnings per share surged 105.3% year-over-year, while global revenue rose 39.5%. For the full year, earnings are expected to improve 21.4%.
The company also has a Sentiment Grade of B, which means it has shown consistent growth and price performance. For instance, the stock has a beta of 0.63, which indicates it is not very volatile.
Market value: $187.6 billion
Dividend yield: 2.4%
In July, U.K.-based pharmaceutical stock AstraZeneca (AZN) closed on a $39-billion takeover deal for competitor Alexion Pharmaceuticals as its latest bet on the lucrative "orphan drug" market. These treatments are often the only remedy for serious medical conditions. As such, they can be fast-tracked for approval by regulatory agencies. Additionally, they allow for instant demand and big margins from patients in need.
This isn't the only angle for AZN, of course. The company has developed blockbuster drugs, particularly in the oncology space. One such drug is lung cancer treatment Tagrisso that has been proven to reduce recurrence or death by 83% in patients.
Alexion Pharmaceuticals will contribute two blockbuster drugs. One is chemotherapy treatment Soliris that fits nicely into the current AZN portfolio of cancer therapies. The other is Ultomiris that is used to treat hemolytic uremic syndrome (aHUS), a rare chronic blood disease.
Market value: $130.9 billion
Dividend yield: 3.3%
Bristol Myers Squibb
However, this is hardly a company stuck in the past, as evidenced by its massive $74 billion deal to acquire next-generation biotech stock Celgene in 2019. Not only does this move ensure a robust product pipeline for BMY for many years to come, but also billions of dollars in operational efficiencies on top of that.
Admittedly, BMY stock has stalled out around the $70 mark over the last few years – particularly as
some of the early coronavirus treatment hopes didn't really materialize for this pharma stock as they did for its competitors.
But it has plenty of big-name blockbuster drugs under its belt regardless of the pandemic – including cancer immunotherapy Opdivo that brought in $7 billion last year and blood clot treatment Eliquis, developed in collaboration with Pfizer (PFE), that saw sales top $9 billion. These are two powerhouses that industry insider Evaluate Pharma predicts will be the third-best and second-best sellers in the world, respectively, among all prescription drugs in five years' time.
And from an income perspective, this drugmaker has built on its record of dividend increases. Most recently, it bumped its
in December, from 45 cents per share to 49 cents per share – the 12th straight year of consecutive increases. And with that $1.96 per share annual payday being just a fraction of the projected $7.50 in fiscal 2021 earnings per share, you can pretty much bank on future increases on top of that, too.
With scale like that, investors get stability and a strong balance sheet. But that doesn't mean LLY is a legacy pick among pharmaceutical stocks whose best days are behind it. Shares are currently trading around all-time highs after roughly doubling from the pandemic lows of March 2020. For the year-to-date, Eli Lilly is up more than 33%.
Market value: $215.1 billion
Dividend yield: 1.5%
A $215-billion powerhouse, Big Pharma icon Eli Lilly (LLY) is not just one of the largest drugmakers on the planet, but it currently makes the list of the top 40 largest corporations in the U.S. by market capitalization – roughly the same size as Intel (INTC) and Danaher (DHR).
Admittedly, LLY offers one of the smaller yields on the list, as measured by current dividend payments. But its quarterly payout of 85 cents per share is up roughly 67% from just 51 cents per share in 2016, and represents less than half of projected earnings this fiscal year, so there's likely more increases in store for shareholders.
And looking forward, the pharmaceutical company's type 2 diabetes drug Jardiance was recently approved by the Food and Drug Administration (FDA)
to treat heart failure with reduced ejection fraction (HFrEF) in people with or without diabetes, as well – opening the door for even more revenue to come in from this drug that just topped $1.1 billion in annual sales last year. That bodes well for continued success for an already high-flying pharma stock.
Gilead Sciences (GILD) posted solid earnings in July that prove this is a pharmaceutical stock with the wind at its back. Specifically, GILD saw a 21% year-over-year increase in Q2 revenue, driven by its blockbuster antiviral treatments Veklury and Biktarvy. Plus, GILD recorded impressive operating cash flow of $2.3 billion for the three-month period.
Market value: $84.7 billion
Dividend yield: 4.2%
in cash on the books to ensure stability for its operations on top of that. All this points to continued dividend growth ahead.
On top of that, the current dividend is less than 40% of projected 2021 earnings – and GILD also has $6.8 billion
But what's really appealing to dividend-hungry investors is the fact that Gilead hiked its quarterly payout to 71 cents per share this spring, thanks to continued success for its core business. At the current rate, GILD's dividend is up 65% from the 43 cents per share it paid out in early 2016.
Given GILD's current share momentum – the stock is up 16% for the year-to-date – a decent dividend growth path and a fairly cheap valuation, it's easy to be attracted to the pharma name.
The icing on the cake is that investors are getting all this for a decent value relative to other pharmaceutical stocks, with GILD boasting a forward price-to-earnings (P/E) ratio of about 10 and a price-to-sales ratio of 3.2.
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When it comes to legacy pharmaceutical stocks, Bristol Myers Squibb (BMY) has roots dating back to 1887. BMY has manufactured a host of popular products over the years, including mass producing the original antibacterial blockbuster, penicillin, during World War II.
In Europe and the U.K., dividend payers often don't follow the fixed quarterly cycle that U.S. stocks do. But even though AZN only pays out distributions twice a year, its yield is still almost twice the average dividend among S&P 500 components at present.
Johnson & Johnson
There's reason for that, of course, as some of GSK's core treatments have had to take a back seat thanks to pandemic disruptions. Most notably is its shingles vaccine Shingrix that has been deprioritized in most doctors' offices given the other public health concerns lately.
All this is starting to catch Wall Street's eye, as shares have rallied to flirt with their highest levels since mid-2020.
GlaxoSmithKline (GSK) is another one of the cheap pharmaceutical stocks on this list, with a forward P/E ratio of about 12.3. It also has a low price-to-sales ratio of just 2.2 times trailing revenue.
However, an eventual normalization in healthcare trends along with the anticipated spinoff of the company's consumer health division in 2022 should give GSK a nice tailwind. And an estimated $11 billion to reinvest in its core pharmaceutical and vaccine business as well as the efficiencies of a streamlined operational structure should help, too.
As with AstraZeneca, GSK is a U.K.-based firm and its dividends fluctuate a bit (versus the fixed structure of U.S. dividend stocks). But based on its annual payout, GlaxoSmithKline has a yield that is twice that of many other pharmaceutical stocks on this list.
Market value: $96.6 billion
Dividend yield: 5.8%
There's something to like about healthcare powerhouse Johnson & Johnson (JNJ) regardless of your strategy right now.
J&J is one of only two S&P 500 companies – multi trillion-dollar tech stock Microsoft (MSFT) is the other one – with a perfect AAA credit rating. Furthermore, JNJ boasts more than $82 billion in annual revenue, currently sits on $25 billion in cash and short-term investments and cleared $22 billion in free operating cash flow last year.
Interested in a play on its single-dose COVID-19 vaccine success? How about a focus on its rock-solid consumer health business built on megabrands like Band-Aid and Tylenol? Or maybe it's the growth potential of JNJ that interests you, with Wall Street's consensus projection for average annual earnings growth hitting about 9% over the next five years despite its already massive scale?
You'd be hard-pressed to find a stock with a richer history, too, or more proof of a commitment to shareholder value.
That stability and reliability has allowed JNJ to deliver at least one dividend increase per year for nearly six decades straight, putting it among the rare group of Dividend Kings with the most impressive record of increasing payouts on Wall Street. If you're looking for reliability among pharmaceutical stocks, then JNJ is definitely worth a look.
Admittedly, there are things other than branded pharmaceuticals going on here. But for some investors, that diversified revenue is an appealing factor when you compare it with other stocks that live or die based on patent expiration cycles or upcoming FDA approvals.
Market value: $419.1 billion
Dividend yield: 2.6%
Johnson & Johnson
But in the here and now, PFE is winning over investors of all stripes because of a high-profile approval for its coronavirus vaccine. This has resulted in mandates for Americans to get their jab, from both governments and private companies looking to put a lid on coronavirus once and for all.
The stock has a stable of blockbuster drugs making more than $1 billion in annual revenue. These include a pneumonia vaccine found under the
Pfizer (PFE) is one of the best-known pharmaceutical stocks on the planet. This U.S.-based healthcare giant is a Dow Jones (.DJI) stock and has been in operation in some way for roughly 170 years.
Of course, this news cycle is nice and has helped lift PFE nearly 26% year-to-date. But there is a lot more going for Pfizer in 2021 than its COVID-19 response alone.
Prevnar brand, fibromyalgia treatment Lyrica and the BMY collaboration Eliquis to name a few.
Market value: $237.8 billion
Dividend yield: 3.7%
French pharmaceutical company Sanofi (SNY) is a $120-billion drugmaker. It offers a variety of treatments, including drugs that target genetic disorders such as Gaucher disease and autoimmune conditions like multiple sclerosis. SNY's products serve an important niche for many patients around the world.
This is the first-ever biologic to show improvements for small children with moderate- to-severe skin conditions.
One recent example is Sanofi's Dupixent eczema treatment, developed in conjunction with Regeneron Pharmaceuticals (REGN).
vaccine business in 2022 as folks return to the doctor for more regular visits.
There's a strong core of underlying vaccines that Sanofi also provides, including influenza and meningitis shots. The pandemic certainly helped prove the value of getting your preventative jabs – and this could help lift SNY's
Market value: $121.4 billion
Dividend yield: 4.0%
There are also structural improvements at Pfizer worth calling out for the long-term potential in this stock, beyond the grind of its product portfolio. CEO Albert Bourla took the helm in 2018, and under his leadership the company has taken some serious steps into resizing operations.
These include the spinoff of Pfizer's generics and off-patent drugs division in 2020 via Viatris (VTRS), which allows the firm to focus on branded pharmaceutical research. Additionally, there was the move to consolidate some of its consumer health assets like Advil pain relief or Centrum vitamins under a joint venture with GlaxoSmithKline.
And if you're a dividend investor, the icing on the cake is that all this has occurred without a single hiccup for dividends. Pfizer recently announced its 332nd consecutive quarterly dividend will be paid in December. That's more than 80 years of consistent paydays to shareholders of this Big Pharma mainstay.
As with the U.K. pharmaceutical stocks on this list, Sanofi doesn't pay fixed quarterly dividends. In fact, it only pays once per year around the end of April or the beginning of May. But based on the most recent distribution of about $1.90 per share, SNY stock yields roughly three times what the typical S&P 500 company does. That could make this dividend stock worth waiting for.
These nine pharmaceutical stocks are among the best