Equities never follow a flawless, unimpeded upward path. Sometimes, even the strongest companies will encounter issues that will sink their stock prices. That's OK. The key to earning great returns over five years or more is sticking with those longtime winners, even when they aren't exactly winning. Doing so will be worth it in the end.
Let's look at two stocks that haven't been able to keep up with the rising stock market over the past few years: CVS Health (CVS 1.63%) and Gilead Sciences (GILD 1.10%). Despite their issues, these two healthcare giants are excellent picks, particularly for dividend investors.
NYSE: CVS
Key Data Points
1. CVS Health
CVS Health is not living up to expectations. Financial results have been disappointing in the past 18 months, partly due to lower revenue from COVID-19 vaccines. Still, even beyond that, CVS Health has revised its guidance downward multiple times. Investors tend to be a bit spooked when a company does this once. CVS Health revising its own internal projections on several occasions sends a bad signal.
High uncertainty is even scarier than high risk for many investors, and that's precisely the issue CVS Health faces right now. However, the company has plenty going its way, especially for long-term investors. It has a comprehensive suite of healthcare services, from primary care and insurance to what it is best known for as one of the largest pharmacy chains in the U.S. Focusing solely on CVS Health's pharmacy business would be a mistake.
The company's ecosystem ensures that it holds patients' hands throughout their care journey. CVS Health is still looking for new opportunities. While it sells medicines marketed by other companies, it recently launched a subsidiary, Cordavis, to develop biosimilar drugs. There is a vast market here: Most Americans think prescription medicines are too expensive. Biosimilars provide much cheaper options.
And while this market is incredibly competitive, CVS Health has an advantage over most biosimilar drugmakers. It already has a vast network of potential patients within its ecosystem. CVS Health won't run out of growth opportunities within a massive and growing healthcare industry. The company has been solid in the past. Even with the struggles it is experiencing, CVS Health's robust ecosystem and solid brand name should allow it to bounce back. The company's dividend program looks attractive, too.
In the past 10 years, CVS Health has increased its dividends by 142%. The company currently offers a forward yield of 4.64%, well above the S&P 500's average of 1.35%. CVS Health's dividend is likely safe for the next decade. It remains a solid pick for income investors despite recently lagging the market.
NASDAQ: GILD
Key Data Points
2. Gilead Sciences
Gilead Sciences has a vast portfolio of medicines across oncology, virology, and HIV, where it is arguably the leader. Though the biotech has encountered some issues in the past few years, notably on the regulatory front, it has kept its revenue and earnings afloat thanks to its COVID-19 antiviral, Veklury. Gilead Sciences is now moving past that. In the first quarter, it generated revenue of $6.1 billion, an increase of 5% year over year (6% excluding Veklury).
That's a decent performance for a biotech giant. Gilead Sciences' most important growth driver, HIV medicine Veklury, recorded sales of $2.9 billion, representing a 10% year-over-year increase. Biktarvy's U.S. market share in the quarter was about 49%, an increase from the 46% in the comparable period of the previous fiscal year. It recently earned a label expansion in pregnant adults.
Another one of Gilead Sciences' HIV medicines -- Sunlenca, a six-month, long-acting treatment -- looks somewhat promising. Sunlenca first earned regulatory approval in the U.S. in December 2022. It is not contributing significantly to Gilead Sciences' top line yet, but it is undergoing several clinical trials, including in the HIV PrEP market.
Gilead Sciences has also been ramping up efforts in its oncology unit. It currently has nearly a dozen programs in phase 3 studies in this area, with many more in earlier stages of development. Gilead Sciences has over 50 programs, more than enough to expand its lineup in the coming years. Even a handful of approval or label expansions annually will contribute meaningfully to the company's top line.
Lastly, Gilead Sciences' dividend program looks attractive. The company's forward yield stands at 4.58%, and it has increased its payouts by 79% in the past decade. Gilead Sciences should continue raising its payouts through 2034 and beyond.
