Dependable dividend stocks can be extremely useful during periods of market volatility.
Currently, we are going through the biggest market pullback since the March bottom. Some believe that this will be a short-lived dip, while others believe that it’s the start of a more, extended correction.
Analysts are predicting significant volatility ahead of the election. Moreover, there are increasing concerns over the economy’s recovery which could add to the volatility. So, this could be the right time to ensure a steady income by adding a few dividend stocks to your portfolio.
While looking for dividend stocks, the pharmaceutical industry could be a good choice, as it has been showcasing consistent recovery since the virus-led market crash. The pharmaceutical industry has significantly benefited from the optimism over a potential Covid-19 vaccine or a treatment. This is evident from iShares U.S. Pharmaceutical ETFs (IHE) 30% gain since its March low.
Johnson & Johnson (JNJ), Merck & Company, Inc. (MRK), and Pfizer, Inc. (PFE) are three top pharmaceutical stocks that are in the process of developing a vaccine for Covid-19. So, in addition to boosting your returns if they happen to be successful, their dividend payments could help you generate a steady income.
Johnson & Johnson (JNJ)
JNJ operates in three main segments — Consumer, Pharmaceutical, and Medical Devices. JNJ has an annual dividend of $4.04 which yields 2.72%. The company declared a cash dividend of $1.01 per share for the third quarter of 2020.
Over the past six years, JNJ has returned more capital to shareholders through its dividend issuances than 98% of other dividend-paying US stocks in the Stocknews.com universe. Recently, JNJ entered into a definitive agreement to acquire Momenta Pharmaceuticals, Inc. (MNTA) in an all-cash transaction for approximately $6.5 billion, which will help drive its growth.
JNJ has been conducting the Phase 1/2a first-in-human clinical trial of its investigational SARS-CoV-2 vaccine, Ad26.COV2-S, recombinant in the United States and Belgium, and also planning its Phase 3 clinical trial with the National Institute of Allergy and Infectious Diseases (NIAID), contingent on regulatory approval of its previous trials. The collaboration between Janssen Pharmaceutical Companies of JNJ and Biomedical Advanced Research and Development Authority (BARDA) will help accelerate the process of this vaccine development.
Furthermore, the company’s deal with Catalent Pharma Solutions (CTLT) will help ramp up its vaccine production infrastructure. Janssen Pharmaceutica, which is owned by JNJ has entered into an agreement with the U.S. government for the large-scale domestic manufacturing and delivery of 100 million doses of its Covid-19 vaccine candidate, Ad26.COV2.S, for use in the US following approval.
JNJ has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. JNJ’s EPS is expected to grow by, 5.1% per annum in the next five years. The stock has grown more than 20% since its March low.
How does JNJ stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating
You can’t ask for better. The stock is also ranked #1 out of 232 stocks in the Medical-Pharmaceuticals industry.
Merck & Company, Inc. (MRK)
MRK is a biopharmaceutical company that researches and develops vaccines and medicines to improve lives. MRK has an annual dividend of $2.44 which yields 2.86%. Over the past six years, MRK has returned more capital to shareholders through its dividend issuances than 97.4% of other dividend-paying US stocks in the Stocknews.com Universe. MRK declared a quarterly dividend of $0.61 per share for the fourth quarter of 2020.
MRK announced that KEYTRUDA, the company’s anti-PD-1 therapy, has received two new approvals from the Japan Pharmaceuticals and Medical Devices Agency (PMDA) and KEYTRUDA monotherapy is now approved for the treatment of patients whose tumors are PD-L1-positive. Merck Animal Health acquired IdentiGEN, which will improve Farm-to-Table Animal Traceability Solutions for Livestock and Aquaculture.
MRK has been working with IAVI and has acquired Themis for the development of V590 and V591, respectively, which are two vaccine candidates for Covid-19. Furthermore, MRK has also collaborated with Ridgeback Bio to develop an oral antiviral candidate called MK-4482 for the treatment of Covid-19, which is currently in Phase 2 trials.
In the second quarter, GAAP EPS increased 15% and GAAP net income increased 12% year-over-year. MRK has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. MRK’s EPS is expected to grow by 6.3% per annum in the next five years. The stock has gained more than 15% since its March lows.
It’s no surprise that MRK is rated a Strong Buy in our POWR Ratings system. It also has an A for Trade Grade, Buy & Hold Grade, and Peer Grade, and a B for Industry Rank. In the 232-stock Medical-Pharmaceuticals industry, it is ranked #2.
Pfizer, Inc. (PFE)
PFE, one of the world’s largest pharmaceutical companies, announced a multi-year agreement with Gilead Sciences (GILD) to bolster the supply of Gilead’s investigational antiviral remdesivir for the treatment of Covid-19. The stock has grown more than 20% since its March low.
PFE paid $4.2 billion of dividends during the first six months of 2020. PFE has an annual dividend of $1.52 which yields 4.18%. The company declared a cash dividend of 38 cents on its common stock for the third quarter 2020 which is its 327th consecutive quarterly dividend. PFE reports less variability in its cash flow than 98.6% of dividend stocks in the StockNews.com universe.
PFE is also working in collaboration with BioNTech (BNTX) to develop a vaccine for coronavirus. The company announced that two out of the four vaccine candidates under the BNT162 Mrna-based vaccine program were granted Fast Track designation from the FDA based on the positive initial data of phase1/2 clinical studies in Germany and the United States.
The companies began phase 2b/3 selecting BNT162b2 as the lead vaccine candidate and remain on track for regulatory review as early as October this year. If the trials are successful, the companies will be able to manufacture up to 100 million doses by the end of 2020 and approximately 1.3 billion doses by the end of next year.
PFE and BioNTech have also agreed to supply their BNT162 mRNA-based vaccine candidate to Canada and Japan contingent on clinical success and regulatory approval. PFE has an impressive earnings surprise history with the company beating consensus EPS estimates in three out of the trailing four quarters. PFE’s EPS is expected to grow by 5.4% per annum in the next five years.
PFE’s POWR Ratings reflect this promising outlook. It has an overall rating of Buy with a grade of A in Trade Grade and Peer Grade and a B in Buy & Hold Grade and Industry Rank. Among the 232 stocks in the Medical-Pharmaceuticals industry, it’s ranked #13.
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JNJ shares fell $0.11 (-0.07%) in after-hours trading Tuesday. Year-to-date, JNJ has gained 2.98%, versus a 4.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Anmol Suratkal
Anmol began his career as a financial writer and evolved into an investment analyst and journalist with a special interest in risky instruments. He specializes in analyzing financial data and writes insightful articles to help investors generate solid long-term returns. More...
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