It's not easy to find elite healthcare stocks under $100, because those are well-known and represent solid companies with less risk to investors.
Although hard, it's not impossible, there are healthcare companies with solid earnings and dividend growth that can be had for less than a bill with Ben Franklin's picture on it.
Gilead Sciences (GILD -2.21%) and Bristol Myers Squibb (BMY -7.58%) have posted triple-digit percentage gains over the past 10 years in revenue, earnings per share (EPS), and total return price. On top of that, shares of Gilead and Bristol can both be bought for less than $90 a share, at least for the time being.
GILD EPS Diluted (Annual) data by YCharts
Gilead Sciences expanding beyond its HIV franchise
Gilead is a biopharmaceutical company that specializes in therapies to treat HIV, viral hepatitis, and cancer. Its shares are up more than 20% so far this year. The company benefited greatly during the height of the pandemic from sales of its COVID-19 therapy Veklury (remdesivir), and those sales are understandably slowing. However, the company's strong franchises in HIV therapy and oncology should lead to continued growth. In addition, it put the profits from Veklury to good use, paying down $1 billion in debt in the third quarter.
The company reported third-quarter revenue of $7 billion, down 5% mainly because Veklury sales dropped 52% year over year to $925 million. However, Gilead's various cell therapies to treat cancer rose to $398 million, up 79% over the same period in 2021, led by breast and bladder cancer therapy Trodelvy, and blood cancer drugs Yescarta and Tecartus. It also has a potential HIV blockbuster in lenacapavir, because the twice-yearly injection will allow some patients to control the disease without having to take daily medication. The therapy has been approved in Europe and the company is awaiting approval from the Food and Drug Administration (FDA), with a Prescription Drug User Fee Act (PDUFA) date of Dec. 27.
The company's HIV drug franchise grew 7% year over year to $4.5 billion. Overall, the company's revenue, once you take Veklury out of the picture, was $6.1 billion, up 11%% year over year.
The company also upgraded its guidance to place yearly revenue between $25.9 billion and $26.2 billion, up from earlier estimates of $24.5 billion to $25 billion.
Gilead also delivers a solid quarterly dividend, which it raised by 2.8% this year to $0.73, representing a yield of around $3.4%. The company has raised its dividend every year since it instituted one in 2015 and has grown it by 69.7% in that time. Its cash dividend payout ratio is 40.95%, so the company can safely continue to increase the dividend.
Bristol has an answer for Revlimid's decline
Bristol's former top-selling drug, Revlimid, used to treat multiple myeloma (a type of bone cancer), brought in $2.2 billion in the third quarter, representing a drop of 28% year over year thanks to generic competition. Despite that, the stock is up more than 27% so far this year because the company has shown it has the drivers to replace Revlimid's revenue. Over the past three years, the company has introduced nine new therapies, which are beginning to pay off.
In the third quarter, Bristol Myers Squibb's new product portfolio was up 66% year over year to $553 million, led by the new melanoma drug Opdualag, increased sales for Reblozyl, used to treat anemia in beta thalassemia patients, and Abecma used to treat multiple myeloma.
Overall, for the quarter, revenue was reported as $11.2 billion, down 3% year over year, but EPS was listed as $0.75, up 9% over the third quarter of 2021.
The company's new top seller, blood thinner Eliquis, generated $3.2 billion in the third quarter, up 11% year over year. Its No. 3 seller, Opdivo, was responsible for $1.9 billion in revenue, up 12% over the same period last year. The drug also just scored a late-stage trial success as an adjuvant therapy to treat patients with stage IIB/C melanoma who have had their cancers removed surgically. In the study, Opdivo was shown to prevent the melanoma from returning at a 58% higher rate than a placebo.
Bristol has raised its quarterly dividend for 12 consecutive years, including a 10% boost this year to $0.54 per share. That works out to a yield of around 2.7% and a cash dividend payout ratio of 36.05%, well within the safety range, meaning that there's plenty of room for continued dividend increases.
Already passing the test
Both companies are beating the market so far this year -- despite declining sales from their top-selling therapies from a year ago. That's because investors can see the companies have strong runways to replace those blockbusters.
Gilead Sciences and Bristol Myers Squibb provide a nice combination of steady earnings and dividend growth, two big reasons why investors have warmed to them this year.
