Are pharmaceutical stocks a good investment?

Since many pharmaceutical companies pay attractive dividends, these types of stocks are well-suited for income-focused investors. However, the high cost and long elapsed time between drug discovery and approval make investing in pharmaceutical stocks relatively risky.

What are the top pharmaceutical companies?

Top pharmaceutical companies based on market cap include Eli Lilly, Johnson & Johnson, AbbVie, Novo Nordisk (NYSE:NVO), Novartis (NYSE:NVS), AstraZeneca (NYSE:AZN), Merck (NYSE:MRK), and Pfizer.

Which pharma stock gives the highest dividend?

Pfizer offered the highest forward dividend yield among big pharma stocks in early 2026.

Which pharma stock is best for the long term?

It's difficult to know for sure which pharma stock is best for the long term. However, several pharma stocks have survived and thrived for more than 100 years in business, including Johnson & Johnson and Pfizer.

What is the most undervalued pharma stock?

As of May 2026, the most undervalued pharma stock based on the forward price-to-earnings ratio was French drugmaker Sanofi (NASDAQ: SNY), with a forward earnings multiple of 8.6.

Does Warren Buffett invest in pharmaceuticals?

Warren Buffett has invested in several pharmaceutical stocks in the past, including AbbVie, Bristol Myers Squibb, Johnson & Johnson, Merck, and Pfizer. However, his Berkshire Hathaway (NYSE:BRKA) (NYSE:BRKB) portfolio currently does not include any pharma stocks.

4 Best Pharmaceutical Stocks for 2026 and How to Invest

By Keith Speights – Updated Aug 14, 2026 at 11:45 AM EST | Fact-checked by Parker Hicks

Key Points

Investing in pharmaceutical stocks offers dividends and growth from a $2 trillion market.
Eli Lilly leads in market cap, with promising drugs in obesity and diabetes treatment.
Pfizer, despite challenges, maintains investment appeal with a robust developmental pipeline.

Buying pharmaceutical stocks gives investors exposure to the global pharmaceutical market. This market totals roughly $2 trillion and continues to grow. The huge sector improves the quality of life for many people while creating attractive opportunities for long-term investors.

Before you invest in pharmaceutical companies, learn about some top picks and how to choose the best stocks in the pharmaceutical sector.

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Pills in the form of a dollar sign. — Image source: Getty Images.

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Top pharmaceutical stocks for 2026

Here are our top picks for pharmaceutical stocks investors should consider in 2026.

Ticker Information Table
Name and ticker	Current price	Market capMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.	Dividend yield
AbbVie (NYSE:ABBV)	$249.46	$440.8 billion	2.74%
Eli Lilly (NYSE:LLY)	$1,180.16	$1.1 trillion	0.69%
Johnson & Johnson (NYSE:JNJ)	$260.35	$627.4 billion	2.01%
Pfizer (NYSE:PFE)	$26.79	$152.7 billion	6.42%

Data as of Aug 15, 2026. Showing 4 of 4 total entries.

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1. AbbVie

For years, the top-selling blockbuster drug -- defined as one that generates more than $1 billion in annual sales -- for AbbVie (ABBV -0.54%) was Humira, which is approved for treating rheumatoid arthritis and several other autoimmune diseases. However, Humira's sales are sinking as it faces competition following the loss of patent exclusivity in 2023.

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NYSE: ABBV

AbbVie

Today's Change

(-0.54%) $-1.36

Current Price

$249.46

Key Data Points

Market Cap

$441B

Day's Range

$247.68 - $250.61

52wk Range

$190.75 - $267.47

Volume

4.2M

Avg Vol

6.7M

Gross Margin

71.42%

Dividend Yield

2.74%

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The good news is that AbbVie prepared in advance for the challenges it would face once Humira went off-patent. The company has two Humira successors on the market: Skyrizi and Rinvoq. The two drugs' combined sales in 2025 eclipsed Humira's peak annual sales.

Meanwhile, AbbVie's lineup features other big winners. Sales for cancer drugs Elahere and Vraylar continue to climb. The company's migraine drugs, Qulipta and Ubrelvy, are also enjoying strong market momentum.

Investors also have a lot to like about AbbVie's dividend. The company belongs to the elite group of stocks called Dividend Kings, which have increased their dividends for at least 50 consecutive years. In just the past five years, AbbVie has increased its dividend by more than 30%.

2. Eli Lilly

Eli Lilly (LLY -2.25%) ranks as the largest healthcare company in the world based on market cap. Lilly vaulted to the top primarily because of soaring sales for its type 2 diabetes drug Mounjaro and obesity drug Zepbound.

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NYSE: LLY

Eli Lilly

Today's Change

(-2.25%) $-27.11

Current Price

$1,180.16

Key Data Points

Market Cap

$1.1T

Day's Range

$1171.20 - $1199.00

52wk Range

$685.15 - $1249.45

Volume

2.3M

Avg Vol

Gross Margin

83.40%

Dividend Yield

0.69%

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These two products (which share the same active ingredient) could be on track to become among the most successful drugs of all time, according to some analysts. Lilly has expanded its Mounjaro/Zepbound franchise into other indications as well, including obstructive sleep apnea.

Perhaps the greatest threats to Mounjaro and Zepbound come from Lilly's own pipeline. In April 2026, the company won U.S. regulatory approval of Foundayo (orforglipron), an oral obesity drug. Lilly is also evaluating promising obesity therapy retatrutide in late-stage clinical studies.

Eli Lilly's lineup features other successful products, too. They include the cancer drug Verzenio, the diabetes drug Jardiance, and the autoimmune disease drug Taltz.

3. Johnson & Johnson

Johnson & Johnson (JNJ -0.66%) is a healthcare giant that derives the majority of its growth from its pharmaceutical business. J&J boasts a large product lineup that includes immunology drugs Stelara and Tremfya, as well as cancer drugs Darzalex and Erleada.

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NYSE: JNJ

Johnson & Johnson

Today's Change

(-0.66%) $-1.73

Current Price

$260.35

Key Data Points

Market Cap

$627B

Day's Range

$259.16 - $261.71

52wk Range

$173.33 - $274.90

Volume

Avg Vol

8.2M

Gross Margin

68.03%

Dividend Yield

2.01%

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The company's pipeline features almost 40 programs in late-stage clinical testing. These clinical trials are testing new drug candidates and seeking additional approvals for drugs such as Tremfya.

Johnson & Johnson spun off its consumer health unit into a stand-alone entity in 2023. This left the company with its two fastest-growing segments: pharmaceutical and medical devices.

Like AbbVie, J&J is a Dividend King, having raised its annual dividend for 64 consecutive years. The company is also highly resilient, surviving and thriving since it began operations in 1886.

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4. Pfizer

Pfizer (PFE -0.04%) markets several blockbuster products. These include cancer drugs Ibrance and Xtandi, blood thinner Eliquis (which Pfizer co-markets with Bristol Myers Squibb (BMY -1.27%), Prevnar pneumococcal vaccines, and COVID-19 products Comirnaty and Paxlovid.

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NYSE: PFE

Pfizer

Today's Change

(-0.04%) $-0.01

Current Price

$26.79

Key Data Points

Market Cap

$153B

Day's Range

$26.42 - $26.91

52wk Range

$23.58 - $28.75

Volume

23.2M

Avg Vol

41.9M

Gross Margin

64.83%

Dividend Yield

6.42%

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The big drugmaker faces some challenges. Its COVID-19 vaccine sales have declined sharply, and several of Pfizer's top-selling products will lose patent exclusivity over the next few years. However, Pfizer has invested heavily in research and development (R&D).

The company has also made several key acquisitions, including the 2023 acquisition of Seagen. These moves have put Pfizer in a solid position to deliver long-term growth.

The drugmaker's pipeline includes almost 100 candidates. Roughly one-third of these programs are either in late-stage testing or awaiting approval. The company also has promising drugs in earlier-stage development.

Pfizer has long been a favorite among income-seeking investors. Its forward dividend yield is among the highest in the pharmaceutical industry.

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How to buy pharmaceutical stocks

The basics of investing in pharmaceutical companies are no different from investing in any stock. Follow these steps to buy a pharma stock:

Open your brokerage app: Log in to your brokerage account where you manage your investments. If you don't have one yet, take a look at our favorite brokers and trading platforms to find the right one for you.
Search for the stock: Enter the ticker or company name into the search bar to bring up the stock's trading page.
Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
Submit your order: Confirm the details and submit your buy order.
Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

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Benefits and risks of investing in pharmaceutical stocks

The benefits of investing in pharmaceutical stocks include:

Potential for long-term growth. Many pharmaceutical stocks stand to benefit from aging demographics and medical advances.
Income generation. Most large pharmaceutical stocks pay dividends, and some boast exceptional dividend track records.
Attractive valuations. Several pharma stocks are trading at more attractive valuations than the overall market.

However, there are also several risks associated with investing in pharmaceutical stocks, such as:

Potential for clinical failure: Early-stage drug candidates are especially likely to fail, meaning they are proven to be unsafe or ineffective in clinical trials. Even drug candidates in phase 3 testing can ultimately fail.
Potential failure to obtain regulatory approval: Even drug candidates that complete clinical testing may still fail to obtain regulatory approval.
Non-reimbursement risks: To achieve commercial success for approved drugs, pharma companies must convince institutional payers, such as public and private health insurers, to reimburse patients for the costs of their drugs. Pharmaceutical companies must also contend with pressure from these payers to lower drug prices below their targets.
Product liability and litigation potential: The medical risks associated with pharmaceutical drugs expose drugmakers to liability issues. Companies can be forced to recall drugs from the market due to safety concerns, and lawsuits against pharma companies are common.

Methodology: How these stocks were chosen

The primary criterion for selecting these stocks was that they all generate significant revenue in the pharmaceutical industry. Johnson & Johnson is the only member of the group that also has a major focus on another area -- medical technology. However, it's still one of the world's largest drugmakers.

Risk-reward profiles were also important in the selection process. While each of the chosen stocks faces some risks, they all have solid long-term growth prospects that should more than offset them.

Should you invest in pharmaceutical stocks?

Pharmaceutical stocks aren't the best fit for every investor. Many large pharma stocks won't deliver the growth some investors prefer.

However, pharmaceutical stocks could appeal to other investors. Many pharmaceutical companies pay attractive dividends, so their stocks are well-suited for income-focused investors. Pharmaceutical stocks can also be safe havens during periods of market volatility.

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Pharmaceutical stocks FAQ

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About the Author

Keith Speights is a contributing Motley Fool healthcare analyst covering publicly traded companies across pharmaceuticals, biotechnology, medical devices, technology, and marijuana. Prior to The Motley Fool, Keith was CEO of Constant Care Technology, a healthcare technology company; vice president of American HealthTech, a healthcare software company; and a director of operations for Blue Cross Blue Shield of Mississippi, a health insurer. He holds a B.S. in Industrial Engineering from Mississippi State University.

TMFFishBiz

Keith Speights has positions in AbbVie, Bristol Myers Squibb, and Pfizer. The Motley Fool has positions in and recommends AbbVie, Bristol Myers Squibb, Eli Lilly, and Pfizer. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

4 Best Pharmaceutical Stocks for 2026 and How to Invest

Key Points