Medical stocks don't generally have high dividends, but Abbvie (ABBV 0.88%), Pfizer (PFE +1.71%), and Gilead Sciences (GILD 0.77%) all have dividends with yields of 3.5% or more, and these pharmaceuticals stocks serve as a great hedge against inflation because their business models are largely resistant to recessions. People tighten their spending during a downturn, but generally, they don't cut back on their prescriptions.
A high-yielding dividend without sound fundamentals can easily become a dividend trap, but all three of these companies have pipelines with great potential and a strong history of increasing revenue -- and none appear to be overpriced yet.
AbbVie has a plan for its future
AbbVie is a new Dividend King. Counting its time as part of Abbott Laboratories, it has issued a dividend for 50 consecutive years, and since its spinoff from Abbott in 2013, it has increased its dividend by 250%. The company boosted its revenue by 9% this year to $1.41 per share, giving it a yield around 4%.
NYSE: ABBV
Key Data Points
In the second quarter, the company reported revenue of $14.6 billion, up 4.5% year over year, and earnings per share (EPS) of $3.37, up 11.2% over the same period last year.
So far this year, the company's shares are up a little more than 3% and it trades for slightly more than 19 times earnings. The company has made billions off the immunology drug Humira since it was first approved by the Food and Drug Administration (FDA) 20 years ago. In the second quarter, it brought in $5.4 billion worldwide, up 5.8% year over year. While that drug already faces biosimilar competition overseas and will lose its patent protection in the U.S. next year, AbbVie is already moving to replace it with two other high-selling immunology drugs: Skyrizi and Rinvoq, the combination of which it expects to reach $15 million in sales by 2025.
In the meantime, AbbVie has a huge pipeline that includes therapies in immunology, oncology, neuroscience, virology, women's health, and gastroenterology, along with Allergan's aesthetics drugs. Abbvie will likely produce several blockbuster drugs, even if none of them come close to Humira's sales.
Pfizer putting COVID-19-related revenue to use
Pfizer has seen revenue climb by 1,410% over the past three years. It raised its dividend by 2.5% this year to $0.40 per quarterly share, giving it a yield around 3.82%, with a cash dividend payout ratio of 31.18%. It is the 12th consecutive year the company has increased its dividend, and it has increased it by 150% over that period.
NYSE: PFE
Key Data Points
The global company's shares are down more than 9% so far this year but over the past three months, are up more than 5%. In the second quarter, the company reported revenue of $27.7 billion, up 47% year over year. This was led by COVID-19 treatment Paxlovid, with $8.1 billion in sales, and Comirnaty, the company's COVID-19 vaccine that it developed with BioNTech, with $8.8 billion in revenue.
The company had EPS of $1.73, up 77% over the same period last year. Pfizer issued guidance of yearly revenue between $98 billion and $102 billion, up 21% from last year at the midpoint. It also said it expected EPS between $6.30 and $6.45, which would be a 65% increase at the midpoint.
The revenue generated from Paxlovid and Comirnaty may not disappear as the virus will be with us for a while, but they will likely ebb. However, Pfizer has put itself in a strong position by reinvesting its billions toward its pipeline. It has 104 therapies in its pipeline, with 28 in phase 3 trials. This includes a potential blockbuster, the company's mRNA-based flu vaccine, which began its phase 3 clinical trial on Sept. 14. The company is also looking to build revenue through acquisitions, including 36 since 2021. In the meantime, the stock is a steal at only eight times earnings.
Gilead Sciences has been racking up successes
Gilead Sciences, which specializes in oncology and HIV therapies, has been on a winning streak the past few months. In the second quarter, the company reported revenue of $6.3 billion, up 1% over the same period in 2021, due to increased sales of its HIV and oncology therapies, offsetting decreased sales for COVID-19 therapy Veklury and its hepatitis C virus products.
NASDAQ: GILD
Key Data Points
- On Sept. 15, the World Health Organization extended its recommendation for Veklury to treat patients with severe COVID-19.
- On Sept. 16, the CHMP approved a CAR T-cell therapy, Yescarta, developed by Gilead subsidiary Kite, in Europe as a second-line treatment for diffuse large B-cell lymphoma and high-grade B-cell lymphoma.
- On Oct. 3, the FDA approved the retroviral vector manufacturing facility in Oceanside, California, for Kite, making it the only cell therapy company with in-house viral vector manufacturing capabilities.
- On Oct. 11, the FDA accepted for priority review the supplemental Biologics License Application (sBLA) for Trodelvy to treat a late-stage of HR+/HER2- metastatic breast cancer. The drug has already been approved to treat other types of breast cancer, as well as metastatic urothelial cancer, a type of cancer that appears in the upper urinary tract.
Even if you take Veklury out of the mix, Gilead would still have generated $5.7 billion in revenue in the second quarter, up 7% year over year. The company's blockbuster HIV drug, Biktarvy, had $2.6 billion in revenue in the quarter, up 28% year over year and 19% sequentially.
The company's shares are down more than 9% so far this year, which has, in turn, raised the yield on the company's dividend to 4.47%. The company raised its quarterly dividend by 2.8% to $0.73 per share this year. Since initiating a dividend in 2015, the company has increased its dividend every year.
