Big dividends are getting hard to find, but a couple pharma stocks are offering juicy yields at recent prices. Shares of Pfizer Inc. (PFE -1.30%) pay a nice 3.8%, and AbbVie Inc. (ABBV -1.15%) looks even more tempting with a 4.1% yield at recent prices. 

A larger dividend up front won't help you if it doesn't grow, and both of these companies face challenges ahead that could make steady payout bumps difficult or even impossible. Exciting new drugs in development could save the day and keep the distributions growing steadily. Let's stack the pair side by side to see which has a better chance of coming out ahead.

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In the numbers

America's largest pharmaceutical company offers a nice yield now, but its history isn't too reassuring. It's only been about nine years since generic competition for blockbuster drugs forced Pfizer to slash its payout. Also, the company has steadily raised its dividend at a respectable 7.8% annual rate over the past five years, making this year's 6.3% bump a bit of a letdown.

Company Latest Dividend Bump Total Share Repurchase Authority Repurchase Authority as a Percentage of Market Cap
AbbVie Inc. 35% $10 billion 7%
Pfizer Inc. 6% $16 billion 8%

Data source: Company SEC filings.

Rather than commit to a dividend that could be difficult to maintain during an uncertain future, Pfizer beefed up its share repurchase program. AbbVie's share repurchase program is a step behind Pfizer's, but its distribution's grown by leaps and bounds since the company's 2013 debut.

Pfizer expects total revenue to rise just 4% this year, but buybacks will help adjusted earnings grow 11% in 2017 to $2.65 per share, which is the same pace earnings rose last year. With an annualized payout of just $1.36 per share, Pfizer has a lot of room to make big increases even if earnings hit the low end of its guided range for 2018: $2.90 per share. 

This impressive performance pales in comparison to AbbVie's. The company raised adjusted earnings 16% to $5.60 last year and management expects a huge jump to $7.33 per share this year. With its dividend at an annualized $3.84 per share, AbbVie can probably afford to make some more sizable payout bumps in the years ahead.

Going down

Pfizer claims that generic competition following patent expirations for various products led to $2.1 billion in lost revenue last year. Teva launched a generic version of Viagra in December and Lyrica could become vulnerable this December. From this year forward, generic competition around the globe will impact products that were responsible for around 14% of last year's total revenue.

The main patent guarding Humira, the drug responsible for around two-thirds of AbbVie's total revenue, expired last year. A deal with Amgen (AMGN 0.36%) will keep its biosimilar from entering the U.S. market until 2023. The Food and Drug Administration has approved a second copycat competitor from Boehringer Ingelheim, but it's tied up in the courts as well.

Although Humira could become a $21 billion drug in 2020, eventually it will leave a gaping hole in the company's income statement. Luckily, AbbVie has promising younger products on the field and warming up the bench.

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On the way up

Not long before its most expensive pipeline asset flopped, the company predicted non-Humira sales would rise from $9.8 billion last year to more than $35 billion by 2025. Despite Rova-T's disappointment, AbbVie has three drugs in late-stage development that could generate a combined $12 billion several years down the road from now if approved. 

AbbVie doesn't need to wait for FDA approvals to reduce its reliance on Humira. The company's share of sales from a leukemia pill called Imbruvica rose 41% to $2.1 billion in 2017 and could double again in a few more years. 

Pfizer also owes a great deal of its recent success to a more recently launched cancer treatment called Ibrance. During breast cancer trials that led to its approval, Ibrance reduced the risk of disease progression by 42% for the genetically defined group of breast cancer patients it's approved to treat. With this in mind, you can see why sales of the tablets soared to $3.1 billion in 2017, its second full year post-approval.

While Ibrance marches higher, Pfizer's late-stage pipeline is getting set to deliver. An experimental breast cancer tablet it acquired in 2015 helped reduce the risk of disease progression by 46% for a much larger cross-section of patients than Ibrance is cleared to treat. Pfizer hasn't sent an application for talazoparib to the FDA yet, but I expect it to outperform Ibrance if approved.

The better dividend stock to buy now?

Choosing a winner isn't easy, and if it weren't for the dismal state of biosimilar competition, my choice would be different. From the same starting point, it looks like AbbVie can deliver more dividend income over the long run but only if Humira sales keep growing for a few more years then trail off slowly. Given the company's ability to force a heavy hitter like Amgen to settle for a delayed launch, I'd say the odds are good enough to call it a winner today.