Biotech giant Amgen (AMGN 1.31%) isn't having a great year. Its shares are down by 12% since 2023 started, and the company has faced several issues recently that have harmed its financial results, leading many investors to abandon the stock.
Still, there is much to like about this seasoned drugmaker, particularly for those interested in blue-chip dividend stocks. Let's find out why income seekers should strongly consider adding shares of Amgen to their portfolios now.
NASDAQ: AMGN
Key Data Points
Amgen's financial results will improve
Amgen is one of the largest biotechnology companies in the world, with a presence in dozens of countries and a portfolio that boasts more than 20 products. However, many of its medicines are currently deadweights on its top-line growth. Over the past three years, Amgen's revenue growth rate has declined almost consistently.
AMGN Revenue (Quarterly YoY Growth) data by YCharts
Why? First, some of its products are facing competition. Second, Amgen has felt the impact of economic dynamics. Notably, currency exchange rate fluctuations have harmed its growth rates. Third, Amgen entered into a collaboration with Eli Lilly in 2020, whereby it would help manufacture the latter's coronavirus products. With demand for these products dropping, so is Amgen's revenue related to this agreement.
There is not a whole lot Amgen can do about the second and third issues mentioned. Currency exchange dynamics are beyond its control, and the COVID-19 market will continue to subside as the pandemic (hopefully) fades into the rearview mirror. Eventually, these two things should stop negatively affecting the company's results. But Amgen can do something about its current portfolio of medicines that aren't generating the kind of revenue it hopes, even putting aside the company's other problems.
Amgen hasn't just been sitting on its laurels, however. Earlier this year, it launched Amjevita, a biosimilar for AbbVie's Humira, in the U.S. market. Humira is an immunology drug that hit peak annual sales of $21.2 billion last year. Amjevita has been in use in Europe for years, but the U.S. market provides plenty of potential as well.
In the biosimilar market, Amgen recently earned approval in Europe for Bekemv, the first biosimilar for Soliris. This medicine targets two rare genetic diseases -- paroxysmal nocturnal haemoglobinuria and atypical haemolytic uraemic syndrome -- and is marketed by AstraZeneca. Bekemv is under consideration by health regulatory authorities in the U.S. Amgen's newer products also include cancer drug Lumakras and asthma treatment Tezspire, both approved within the past 2 1/2 years.
The company has more than two dozen ongoing programs, too. Amgen is also currently seeking to acquire Horizon Therapeutics, a biotech that focuses on developing medicines for rare rheumatic diseases. While regulators aren't too keen on letting the acquisition go through, the broader point is that Amgen is shopping for a new subsidiary. If it isn't Horizon, it will be another one.
Whatever acquisition the drugmaker eventually makes, the goal will be to bolster its lineup and pipeline, which is good news for shareholders.
There is more room for dividend growth
Amgen is in the habit of growing its dividend at a steady rate. Over the past five years, the company has increased its payout by 61%, which is pretty good. The company's cash payout ratio is currently just a bit over 56%, a reasonable level at which Amgen can likely afford to continue rewarding shareholders with payout hikes. The biotech also offers a dividend yield of 3.65%, more than twice the S&P 500's average of 1.54%.
Of course, great dividend stocks need solid operations to support their payments. While Amgen's business does not seem to inspire confidence right now, the company should be able to bounce back on that front, too; it's not rare for biotechnology companies to go through difficult periods marked by declining sales of older products. Over the long run, Amgen should be able to reverse course and improve its financial results while consistently increasing its dividends. That's what makes it a buy for income-seeking investors.
