Dividends are few and far between for biotech stocks. Most biotechs either don't have the money to pay out dividends or choose to reinvest profits to fund more growth.

However, there are a handful of biotechs that do pay dividends. Three claim dividend yields of 2% or greater: AbbVie (NYSE:ABBV), Amgen (NASDAQ:AMGN), and Gilead Sciences (NASDAQ:GILD). Which of these biotechs is the best dividend stock? 

Dividends graphic

Image source: Getty Images.

Yield

Dividend yield is the amount of dividends paid as a percentage of the current stock price. How do these three biotech stocks compare on dividend yield?

Biotech stock dividend yield chart

Data source: Yahoo! Finance. Chart by author.

AbbVie claims the top spot for dividend yield, but all three biotech stocks boast nice yields that many investors would find attractive.

Yield isn't the most important metric to look at in evaluating dividend stocks, however. A company that pays a high dividend today could be forced to slash its dividend tomorrow. That's why the next two criteria we'll review are even more critical.

Dividend history

The dividend history of a company provides clues about how important the dividend is to the company's management. The chart below shows the dividends paid by each of the three biotechs over the past five years. 

ABBV Dividend Chart

ABBV Dividend data by YCharts.

Gilead Sciences didn't initiate a dividend program until 2015, so the biotech doesn't have much of a track record yet. AbbVie's history is actually better than the chart shows. The biotech was spun off from Abbott Laboratories in 2013. When its parent company's dividend history is factored in, AbbVie has consistently increased its dividend for 44 consecutive years. 

Amgen hasn't been paying dividends nearly that long. However, the biotech has a solid record of increasing its dividends and has grown its dividend more quickly than any of the others. 

Payout ratio

The dividend payout ratio is the amount of dividends returned to shareholders as a percentage of total earnings. A lower payout ratio indicates that a company is probably in better position to continue paying dividends and perhaps even increase dividends in the future.

Biotech stock dividend payout ratio chart

Data source: Yahoo! Finance. Chart by author.

Gilead Sciences appears to be in best position to keep its dividend flowing based on payout ratio. All three biotechs seems to be in good shape, however. Even though AbbVie is using nearly 63% of earnings to fund its dividend program, that's not a bad level and definitely isn't cause for concern.

Growth

There is a catch with payout ratios, however. The metric is a snapshot in time based on current dividend payments and current earnings. But what if earnings decline a lot? That's why it's also important to look at earnings growth prospects.

Wall Street analysts spend a lot of time to create models of earnings growth for companies. Here's how the three biotech stocks stack up in terms of projected earnings growth.

Biotech stock projected growth chart

Data source: Yahoo! Finance. Chart by author.

Based on these projections, AbbVie will grow earnings the most over the next few years. Analysts' estimates can sometimes be far off of what really happens. For example, if AbbVie can't fend off biosimilar competition for Humira, the company's earnings will likely suffer greatly. At the opposite end of the ranking, Gilead Sciences could make a big acquisition that totally changes its earnings outlook.

Best overall

Which is the best biotech dividend stock? I think the clear winner is AbbVie.

AbbVie ranked No. 1 in dividend yield and projected earnings growth. Even though Amgen has increased its dividend the most in recent years, I'd argue that AbbVie's overall track record is the most impressive. Also, although AbbVie's dividend payout ratio is the worst of the three, it's still pretty good.

In my view, AbbVie will likely keep its top spot for a while to come. The company should be able to use legal tactics to hold off Humira biosimilars for at least a few years. I think AbbVie's mouthwatering dividends will keep on flowing in the meantime. 

Keith Speights owns shares of AbbVie and Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has a disclosure policy.