Are you looking for stocks that can deliver steadily growing streams of income? A handful of America's larger biopharmaceutical businesses are so successful that they're able to deliver a slice of their profits to shareholders. These stocks might bounce around with the rest of the stock market, but you can count on these companies to deliver dividend payments to your account that grow every year.
|Company (Symbol)||Recent Stock Price||Dividend Yield|
|Amgen (AMGN -0.55%)||$239||2.6%|
|Pfizer (PFE -0.63%)||$37||4.1%|
|Johnson & Johnson (JNJ -0.56%)||$150||2.6%|
This highly successful drugmaker is actually one of America's pioneering biotechnology companies. In stark contrast to risky start-ups that the word biotechnology brings to mind, Amgen produces a steadily growing profit from sales of branded therapies.
Amgen isn't at all shy about distributing the profit it produces with its shareholders. In the first half of 2020, the company returned $1.5 billion in the form of share repurchases and another $1.9 billion in the form of quarterly dividend payments.
Amgen has raised its payout 103% higher over the past five years, and shareholders can reasonably expect more big dividend bumps ahead. Despite increasing its payout at a blazing pace, Amgen was able to make payments over the past 12 months using just 35% of the free cash flow its operations generated over the same time frame.
Amgen's product lineup sports drugs with blockbuster sales right now, and more new therapies rolling through the pipeline could allow the company to keep raising its payout for years to come.
Second-quarter sales of Enbrel, an injectable treatment for rheumatoid arthritis and psoriasis that originally launched in 1998, came in at an annualized $4.5 billion, and this revenue stream isn't finished yet. Amgen recently won an appeals court ruling that will prevent biosimilar versions of Enbrel from competing for the same patients through 2029 in the United States.
This big pharma is in the middle of a megamerger expected to complete before the end of the year that involves its post-market exclusivity product segment UpJohn, and Mylan (MYL). Buying Pfizer shares now would entitle you to dividend payments from the new company, to be named Viatris, plus dividends from the Pfizer that remains.
UpJohn and Mylan have shown us through the years that successful brands don't necessarily need patent-protected market exclusivity to produce profits. Pfizer expects more than $4.0 billion in free cash flow from the entities that will combine to form Viatris later this year.
The Pfizer that remains will be a lean machine focused on developing new drugs for patients that need them. The company's oncology segment alone expects up to 14 potential approvals from the FDA by 2025.
In addition to an oncology segment ready to deliver blockbuster sales for years to come, BNT162, a coronavirus vaccine candidate Pfizer's is developing in collaboration with BioNTech (BNTX -1.62%) could provide evidence of efficacy before the end of October. The timing all depends on how soon data monitors see a predetermined number of volunteers test positive for COVID-19.
3. Johnson & Johnson
Amgen and Pfizer have regularly rising dividends, but neither can hold a candle to the reliability investors have come to expect from the world's largest healthcare company. Rising pharmaceutical sales coupled with reliable sales of consumer healthcare products and medical devices have allowed Johnson & Johnson to raise its payout for 58 consecutive years.
Despite COVID-19 pandemic headwinds that were expected to crimp the company's top and bottom lines, Johnson & Johnson recently reported third-quarter results that smashed through earlier expectations. While delayed surgical procedures pressured the company's medical device segment, higher than expected pharmaceutical sales pushed adjusted earnings 3.8% higher year over year to $2.20 per share.
Soaring sales of blood cancer drugs like Darzalex and Imbruvica helped pharmaceutical sales rise 5% year over year to $11.4 billion and more new drugs coming through the pipeline will continue moving the needle. That includes a coronavirus vaccine candidate with a potential advantage over BNT162 from BioNtech and Pfizer.
Johnson & Johnson's vaccine candidate Ad26COV2.S uses a non-replicating virus to deliver genetic material human cells use to produce copies of the spike protein the novel coronavirus relies on. This should spur our immune systems to produce antibodies that prevent real copies of the virus responsible for COVID-19 from conducting business as usual.
Johnson & Johnson's coronavirus vaccine candidate should be a lot easier transport and store than BNT162 and other RNA-based vaccines that can only be expected to remain effective for 24 hours in a standard refrigerator. Johnson & Johnson designed Ad26COV2.S to remain effective for at least three months when kept in the basic refrigerators healthcare providers already use to store existing vaccines.
Dividend investing takes time
Success for the vaccine candidates that Pfizer and Johnson & Johnson are developing could send these pharma stocks sharply higher overnight, but that's now why dividend investors find them attractive. All three have a proven track record for delivering profits that grow over time.
There are a lot of ups and downs in the drug-making business, and investors that want a portfolio that delivers a steadily growing income stream need to stick with companies that can overcome inevitable mishaps as they occur. All three of these large and diverse drugmakers have what it take to deliver market-beating gains, just remember to be patient if your new dividend-paying pharma stock hits a snag.