Nervous investors have been selling risky growth stocks in favor of profit-generating businesses that pay steady dividends. The pharmaceutical industry is one area of the stock market that dividend-seeking investors haven't rushed into yet which means some reliably profitable big pharma companies are offering above-average dividend yields at the moment.
These three pharmaceutical giants are strongly profitable and have a history of annual payout increases. Best of all, each of these stocks offers a yield of 2.9% or better at recent prices.
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1. AbbVie
It's been a lousy year for growth stocks, but not steadily profitable dividend payers like AbbVie (ABBV -1.03%). Shares of the big pharma stock have actually climbed about 20% higher over the past three months. Despite the recent gains, it still offers a big 4.1% dividend yield.
AbbVie's raised its dividend by a whopping 120% over the past five years thanks to strong sales of its lead drug Humira. First approved by the FDA in 2002, this treatment for rheumatoid arthritis and psoriasis generated over $20 billion in topline sales for AbbVie in 2021.
AbbVie stock offers a juicy dividend yield at recent prices because Humira's going to face biosimilar competition in 2023. Fortunately, AbbVie launched Rinvoq for arthritis and Skyrizi for psoriasis in 2019. As a pair, Rinvoq and Skyrizi are growing fast enough to offset Humira's impending losses. Combined sales of Rinvoq and Skyrizi reached a combined $4.6 billion in 2021 and AbbVie expects this figure to exceed $15 billion in 2025.
In addition to Skyrizi and Rinvoq, the Botox franchise AbbVie acquired from Allergan in 2020 will help drive growth for AbbVie. It's been a long time since Botox was the only brand of botulinum toxin approved by the FDA to smooth out wrinkles but the brand is stronger than ever.
2. Pfizer
Shares of Pfizer (PFE -0.19%) shot up in December after the company released promising clinical trial data for an oral COVID-19 antiviral drug called Paxlovid. The U.S. government bought enough Paxlovid for 20 million Americans, at more than $500 per person.
Unfortunately, Pfizer's game-changing COVID pill isn't as accessible as it could be. Dampened enthusiasm for Paxlovid has allowed Pfizer's stock price to fall around 11% from its peak last December. Now the shares offer a nice 2.9% dividend yield.
Over the past 5 years, Pfizer's dividend has risen by just 25% but the next five years could be a lot more satisfying. Third-quarter sales of Comirnaty, the company's COVID vaccine reached $13 billion. The ongoing rollout for children 5 through 11 years of age, and perhaps a new formulation specific to the omicron variant could keep this revenue stream from drying up any time soon.
Of course, Pfizer does a lot more than just COVID treatments and vaccines. Excluding Comirnaty sales, third-quarter revenue grew 7% year over year thanks to strong performances from Eliquis, an oral anticoagulant, and a rare disease drug called Vyndamax.
Over the past year, Pfizer needed less than 30% of the free cash flow its operations generated to meet its dividend obligation. With plenty of blockbuster drugs driving growth, the company should have no trouble committing to significant payout raises in 2022 and many years to come.
3. Bristol Myers Squibb
Bristol Myers Squibb (BMY -0.27%) is another dividend-paying pharma stock with a looming patent cliff. The stock is around 6% below a peak it reached last fall and it offers a nice 3.3% dividend yield at the moment.
Investors are rightfully nervous about incoming generic competition for Revlimid, Bristol Myers Squibb's top-selling drug right now. Sales of this multiple myeloma treatment finished the third quarter at an annualized run rate of $13.4 billion.
This spring, Sun Pharmaceutical, will be able to sell limited quantities of a generic version of Revlimid. Limitations mean Bristol won't experience much pricing pressure at first. By the end of 2026, though, unlimited quantities of generic Revlimid hitting the U.S. market will most likely cause sales of the branded version to implode.
Over the past 5 years, Bristol Myers Squibb has been able to raise its dividend program 38.5% higher and more big raises could be up ahead. Revlimid revenue will dry up over the next several years but this pharma giant has over 50 drugs in development at the moment.
Since 2019, the FDA has approved a handful of potential new blockbuster drugs from Bristol Myers Squibb such as Zeposia, Reblozyl, and Abecma. These give the company a strong chance to overcome Revlimid's looming patent cliff and deliver heaps of dividend income to patient investors.
