Dividend stocks are an equity class for all seasons. Speaking to this point, several blue chip dividend stocks have not only weathered the broad downturn among U.S. equities this year, but they have even generated substantial gains for investors in 2022.
Top-tier pharmaceutical stocks, in particular, have been a safe haven for risk-averse investors lately. Two prime examples are the biopharmaceutical heavyweights Amgen (AMGN 0.08%) and Bristol Myers Squibb (BMY +0.83%).
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So far this year, these two elite drugmakers have yielded total returns (when including dividends) of 20% and 11.7%, respectively. These double-digit gains are even more impressive in light of the 18% slump in the S&P 500 and the nearly 25% decline in the NASDAQ Composite through the first six months of 2022. Despite this market-crushing performance, though, shares of Amgen and Bristol are still outstanding buys for conservative investors and passive income seekers alike. Here's why.
Amgen: A sure bet in an uncertain environment
Amgen's newfound popularity among investors is far from an accident. Despite the biotech's struggles with patent expirations and competition from biosimilars (generic versions of biologic therapies), Amgen has been able to bring several new growth products to market over the last few years. For instance, the company is slated to haul in a whopping $9.2 billion in annual peak sales from up-and-coming stars like the cholesterol medication Repatha, the osteoporosis drug Evenity, the lung cancer treatment Lumakras, and the asthma medicine Tezspire.
NASDAQ: AMGN
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On top of these branded medicines, Amgen's broad portfolio of biosimilar medicines is also expected to be a key source of revenue growth for the company over the course of the current decade and beyond.
What this all boils down to is that the biotech's stable of branded and biosimilar medicines ought to produce mid-to-high single-digit levels of revenue growth for the remainder of the decade. Now, Amgen's long-term revenue forecast may not be eye-catching to dyed-in-the-wool growth investors. But it is a noteworthy accomplishment in light of the biotech's ongoing battle with the patent cliff, regulatory headwinds, and the never-ending push from Washington, D.C., to lower drug prices inside the United States.
On the passive income side of the ledger, Amgen sports an annualized dividend yield of approximately 3.14% at current levels, which is about average for its immediate peer group (major drug manufacturers). Perhaps even more importantly, though, the biotech's quarterly distribution appears to be a sure bet based on its reasonable trailing-12-month payout ratio of 71%, rising top line, and growing free cash flow. All told, Amgen's stock offers a favorable mix of top-line growth, respectable levels of passive income, and an overall safe outlook in an environment characterized by high levels of uncertainty.
Bristol: The undisputed champion of business development
Bristol's shares have shrugged off Wall Street's concerns about its upcoming spate of patent expirations to become one of healthcare's best-performing large-cap stocks this year. Investors have piled into this blue chip pharma stock recently for one singular reason: Bristol is simply the best at extracting value from its business development activities. Underscoring this point, the drugmaker has literally remade itself over the past decade through a multitude of game-changing acquisitions, including Medarex, Celgene, MyoKardia, and most recently, Turning Point Therapeutics.
NYSE: BMY
Key Data Points
Bristol, through its various acquisitions, now sports top-tier cancer, cardiology, and immunology franchises. These therapeutic areas frequently receive faster-than-normal regulatory reviews and come with above-average pricing power, as well as longer-than-normal product shelf lives. Bristol has thus built an elite product portfolio across some of the most highly profitable therapeutic areas in all of healthcare. This diversified healthcare giant, in turn, is widely expected to have ample financial firepower to continue pursuing value-creating deals for the foreseeable future.
Dividend-wise, Bristol is also no slouch. The company offers shareholders a respectable 2.95% yield on an annualized basis. Although its trailing-12-month payout ratio stood at 73% at last count, Bristol's modestly growing top line (4% growth projected for 2023 relative to 2022), and steadily rising free cash flow ought to assuage any concerns investors have about a possible reduction.
In sum, Bristol's excellent business development acumen, along with its healthy dividend program, should continue to attract investors on the hunt for ways to navigate this moody market.
