The "Oracle of Omaha," Warren Buffett, has famously been quoted as saying, "Price is what you pay. Value is what you get." Dividend stocks are a tried-and-true way of adding value to your portfolio -- when a company pays a generous dividend, this can be a sign of its potential as a reliable long-term investment. High dividend yields inevitably draw investor cash, which may subsequently boost a stock's price and therefore the portfolios of existing shareholders.
These days, finding robust dividend stocks isn't a walk in the park. But plenty of highly profitable dividend stocks do exist even in the current volatile market. If you're actively searching for dividend stocks, you'll definitely want to add these two large-cap healthcare companies to your list of contenders.
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AbbVie
Biopharmaceutical giant AbbVie (ABBV -4.58%) is among the crème de la crème of stocks known as Dividend Aristocrats. To be listed on the S&P 500's Dividend Aristocrat index, a stock must boost its dividend every year for at least 25 years in a row; AbbVie's history as part of Abbott Laboratories (ABT 0.63%), from which it spun off in 2013, is included there. AbbVie currently pays out a mouth-watering dividend yield of 5%.
Although AbbVie stock fell in March with the rest of the market, it has more than recovered, and the stock is up about 5% year to date. The company has also maintained its high profitability, even during the darkest days of the pandemic. For first-quarter 2020, which ended March 31, the company reported net revenue of nearly $9 billion, up 10% over the first quarter of 2019. In the second quarter, which ended June 30, AbbVie's revenue reached $10.4 billion.
A few factors drove the company's exceptional performance during the first half of this year, and they're likely to play a vital role in the company's ongoing growth story. First, there was AbbVie's blockbuster immunosuppressive drug, Humira, which brought in $4.7 billion in Q1 and $4.8 billion in Q2. Then, there's the company's hugely profitable hematologic oncology (blood cancer) business, which brought in $1.5 billion in Q1 and $1.6 billion in Q2. AbbVie's acquisition of Allergan, which concluded in May, added considerable strength to its portfolio, including existing drugs and therapeutics as well as pipeline products.
The company announced Aug. 25 that it had submitted a regulatory application to the U.S. Food and Drug Administration (FDA) seeking a new label indication for Rinvoq, the rheumatoid arthritis drug it launched in August 2019. If the FDA grants the new indication, AbbVie could also market Rinvoq to treat patients with an inflammatory disease called ankylosing spondylitis. Such a new indication could expand Rinvoq's revenue potential -- the drug brought in $149 million in revenue in Q2 2020 alone.
The end to AbbVie's current momentum is nowhere in sight. Factoring in the Allergen acquisition, AbbVie anticipates diluted earnings per share (EPS) under generally accepted accounting principles (GAAP) to hit somewhere in the range of $4.12 to $4.22 for the whole of 2020.
GlaxoSmithKline
British pharmaceutical company GlaxoSmithKline (GSK 0.49%) closed at $39.90 per share on Wednesday, and its attractive yield of 6.41% is certainly a big draw for investors searching for dividend income.
GlaxoSmithKline's work on multiple concurrent COVID-19 vaccine candidates has been the most talked-about development in the company's pipeline lately. The company is contributing its pandemic adjuvant system to multiple vaccine collaborations with different companies. An adjuvant helps to elicit a more robust immune reaction in the subject. When someone is administered a vaccine that features an adjuvant, this aids the vaccine in being more effective. An adjuvant can also help to stimulate the development of antibodies in less potent vaccines and/or bring about the desired results with a more moderate dose, which can help to alleviate manufacturing constraints during the pandemic.
GlaxoSmithKline is collaborating with Clover Pharmaceuticals and Medicago on two separate vaccine candidates using its pandemic adjuvant system and vaccine technologies proffered by the respective companies. Both candidates from these collaborations are in phase 1 human trials.
But it's GlaxoSmithKline's third collaboration on a COVID-19 vaccine with French company Sanofi (SNY -0.47%) that may be the most compelling. A phase 1/2 study of the vaccine, which uses GlaxoSmithKline's pandemic adjuvant system and Sanofi's S-protein COVID-19 antigen (S-proteins help to elicit neutralizing antibodies) began this week. On July 31, the companies announced an agreement with the U.S. government to provide up to 600 million doses of the vaccine candidate, in return for which GlaxoSmithKline and Sanofi were awarded $2.1 billion in Operation Warp Speed funding. The companies plan to begin a phase 3 safety and efficacy study on the potential vaccine before the end of the year.
GlaxoSmithKline is also collaborating with Vir Biotechnology (VIR 7.86%) on potential antibody-based therapeutics. On Aug. 31, the the companies announced that their monoclonal antibody candidate, VIR-7831 -- designed to treat patients in the early stages of COVID-19 and prevent hospitalization -- had entered a phase 2/3 human trial. Initial data from the study could be released before the year is out.
GlaxoSmithKline has 35 medicines and 15 vaccines in its biopharma pipeline. The company reported second-quarter sales of $10.1 billion, a slight year-over-year decline attributable to the impact of COVID-19. Sales in GlaxoSmithKline's respiratory business were up 17% in the quarter, led by a 62% increase in sales of its chronic obstructive pulmonary disease (COPD) treatment, Trelegy, and a 24% boost in sales of Nucala, a treatment for eosinophilic asthma.
Investors analyzing GlaxoSmithKline's growth potential needn't (and shouldn't) pin their hopes on its role in the COVID-19 cure race. The company has stated emphatically that it "does not expect to profit from sales of its portfolio of collaborations for COVID-19 vaccines made during this pandemic phase, as profit generated will be invested in support of coronavirus related research and long-term pandemic preparedness."
In any case, the company has shown impressive resilience during highs and lows of 2020. The strength of its balance sheet, portfolio, and pipeline all paint a bright picture for its future beyond the pandemic.
