Vertex Pharmaceuticals (VRTX 1.43%) announced stellar third-quarter results last week. The big-biotech's revenue jumped 18% year over year to $2.33 billion. Its adjusted earnings rose 14% to $1.04 billion, or $4.01 per share, easily topping the consensus Wall Street estimate.

The company also raised its full-year 2022 revenue guidance. Vertex now expects revenue of between $8.8 billion to $8.9 billion, up from its previous outlook of revenue in the range of $8.6 billion to $8.8 billion.

But perhaps the most intriguing thing about Vertex's latest update was a question posed in the Q3 earnings call by an analyst. Salveen Richter from Goldman Sachs noted the company's growing cash stockpile and asked if there were plans to initiate a dividend. Is Vertex about to become a dividend stock?

A good question

Richter's question was a good one for several reasons. He correctly pointed out that Vertex now sits atop almost $10 billion in cash, cash equivalents, and short-term investments. That's considerably more cash on hand than several other drugmakers that already offer dividends.

For example, Gilead Sciences' cash position stood at $6.9 billion as of Sept. 30, 2022, and Sanofi had a similar amount of cash as of its last quarterly update. Gilead pays a dividend yield of nearly 3.7%, while Sanofi's dividend yield tops 4%. And the bottom lines for both of these companies are headed down, while Vertex's earnings continue to grow.

Vertex certainly isn't too small to pay a dividend. Quite a few other biopharma stocks with lower market caps than Vertex have dividend programs, notably including GSK, Takeda, and Viatris.

It's also highly likely that Vertex's cash position will increase significantly going forward unless the company does something different. Vertex added $2.2 billion in cash in the first three quarters of 2022. The big biotech did so even while shelling out $320 million in cash on its acquisition of Viacyte this year.

An even better answer

We don't have to wait in suspense to know whether or not Vertex will become a dividend stock anytime soon. CEO Reshma Kewalramani replied to Richter's question succinctly: "Our strategy on capital has not changed. The focus is on innovation, both internal and external."

Vertex CFO Charlie Wagner reiterated that focus, adding: "The priority continues to be an investment in innovation. I think we've been very active over the last few years and it shows."

Wagner noted that 40% of Vertex's pipeline programs directly resulted from business development that the company has undertaken over the past few years. He pointed out that Vertex has also bought back some shares in recent years. However, those stock repurchases have been to offset dilution.

The preeminent priority for Vertex's cash stockpile will be investing in bolstering its pipeline instead of dividends or buybacks. That's an answer that investors should like. 

A different kind of dividend

I think that Vertex's investment in internal research and development and external business-development deals will pay investors a different kind of dividend. We only have to look at the company's late-stage programs to see how shareholders might be rewarded.

Vertex and CRISPR Therapeutics could win regulatory approvals for exa-cel in treating beta-thalassemia and sickle cell disease by late next year. The company is evaluating VX-548 in phase 3 testing as a non-opioid therapy for acute pain. Inaxaplin is in a late-stage study targeting APOL1-mediated kidney disease. All three candidates have the potential to be blockbusters.

Over the last 10 years, Vertex has delivered stock gains that are more than double the total return of the S&P 500 (which includes dividends). The company has clearly demonstrated that it's using capital effectively. Vertex isn't about to become a dividend stock -- and that's good news for investors.