Biotech stocks have performed well this year. The SPDR S&P Biotech ETF -- an industry benchmark -- is up 21% this year. Two giants of the industry that have helped drive that performance are Amgen (AMGN +0.85%) and Gilead Sciences (GILD +2.26%). These well-known drugmakers have seen positive developments recently, leading to superior returns.
And the best news is that they still have plenty to offer investors, especially those looking for solid income stocks. Here is why Amgen and Gilead Sciences are great dividend stocks to buy.
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1. Amgen
Amgen has outpaced broader equities this year on the back of strong financial results and solid clinical progress, despite the looming threat of patent cliffs. In the third quarter, the company's revenue increased by a robust 12% year over year to $9.6 billion.
Many of the biotech's growth drivers performed well, including Repatha, a medicine for high cholesterol whose sales for the period totaled $794 million, 40% higher than the year-ago period. Amgen's Tezspire, an asthma treatment, recorded revenue of $377 million, also up 40% compared to the year-ago period. The top line might not grow as fast in the next few quarters, as biosimilar competition for the company's denosumab -- a bone-health medicine marketed under the brands Prolia and Xgeva -- penetrates the market.
NASDAQ: AMGN
Key Data Points
However, Amgen should be able to overcome this challenge thanks to its existing products, which still have years of sales growth ahead, as well as future new launches. In the latter category, one of the most promising candidates is MariTide, an investigational long-acting medicine for weight management. The company has started phase 3 studies for MariTide across obesity, type 2 diabetes, and several other conditions.
Furthermore, Amgen has recorded important late-stage clinical trial wins for brand-new medicines this year; these include bemarituzumab, a potential medicine for gastric cancer. The company should launch several new drugs over the next few years to help smooth out losses from patent cliffs.
Consistent financial results and ability to rejuvenate its pipeline should allow it to maintain its solid dividend program; Amgen has increased its payouts every year since it initiated them in 2011. The stock's forward yield is now 3% (the S&P 500's average is 1.2%), and the company still has plenty of room to increase its dividend, given its cash payout ratio of 46%. Amgen is an excellent dividend stock to add to your portfolio.
Gilead Sciences
Gilead Sciences has also outperformed the market this year, as it continues to leverage its dominance in its core therapeutic area. The biotech has long been a leader in the HIV drug market, a segment that remains its biggest growth driver. In the third quarter, total revenue grew by 3% year over year to $7.8 billion.
While that doesn't seem like a strong performance, remember that the company's revenue has been somewhat inconsistent over the past few years due to fluctuating coronavirus-related sales. Gilead's Veklury was among the first COVID-19 medicines to receive emergency use authorization. Even as several other treatments have fallen out of favor, it maintains a decent share, albeit in a somewhat unpredictable market.
That aside, though, Gilead's Biktarvy, an HIV medicine, reported sales of $3.7 billion, 6% higher than the year-ago period. Revenue from Descovy, another important HIV therapy, jumped by 20% year over year to $701 million. Some investors have worried that Gilead Sciences is too dependent on its HIV segment. Thankfully, the biotech is working toward significantly diversifying its lineup.
NASDAQ: GILD
Key Data Points
Gilead has made significant strides in oncology over the past few years, though it has also faced setbacks. Oncology-related revenue actually dropped 3% year over year to $788 million in the third quarter. Even so, Gilead Sciences has a large active pipeline in oncology that's even bigger than the one for HIV. In the next few years, expect label expansions and new approvals in the cancer market for the company, which should help pull its sales in the right direction.
Then there's the liver diseases portfolio, whose sales in the period grew 12% year over year to $819 million. Gilead's business is still performing well enough, and its diversification efforts should bear fruit over the long run by reducing its concentration in the HIV market.
Gilead Sciences has a forward yield of 2.7%, cash payout ratio of 38%, and track record of an 83.7% dividend increase over the past decade. Those factors make the stock a great pick for dividend seekers.
