After the three major stock market indexes posted three straight days of gains, the S&P 500 and Nasdaq Composite ended lower yesterday ahead of key inflation data and nagging COVID-19 omicron variant fears. Amid this market uncertainty, we think it could be wise to bet on quality pharmaceutical stocks, given the industry’s defensive nature. Companies in this space typically witness steady demand for their products and services irrespective of the economic conditions.
Moreover, the industry is expected to grow going forward as the population ages and chronic diseases rise. According to a LINCHPIN report, the pharmaceutical industry is expected to increase to $1.5 trillion by 2023.
Therefore, we think dividend-paying quality pharmaceutical stocks Pfizer Inc. (PFE), Merck & Co., Inc. (MRK), and Bristol-Myers Squibb Company (BMY) could be solid additions to one’s portfolio now to secure a steady income stream. They each have an overall Strong Buy rating in our POWR Ratings system.
Pfizer Inc. (PFE)
New York City-based biopharmaceutical company PFE offers medicines and vaccines in various therapeutic areas, including cardiovascular, metabolic, pain, biologics, small molecules, and immunotherapies. In addition, yesterday, the U.S. FDA expanded the Emergency Use Authorization (EUA) of a booster dose of PFE and BioNTech SE’s (BNTX) COVID-19 Vaccine to include individuals 16 years of age and older.
On November 17, 2021, PFE announced the successful completion of its acquisition of Trillium Therapeutics, a clinical-stage immuno-oncology company that is developing innovative therapies for cancer treatment. Chris Boshoff, MD, PhD, Chief Development Officer, Oncology, PFE Global Product Development, said, “Today’s announcement combines Pfizer’s research and global development capabilities with Trillium’s innovative discoveries, allowing us to accelerate breakthroughs that change patients’ lives.”
PFE’s revenues increased 134.4% year-over-year to $24.09 billion for its fiscal third quarter, ended September 30, 2021. While its adjusted income increased 132.7% year-over-year to $7.69 billion, its adjusted EPS came in at $1.34, up 127.1% year-over-year.
PFE has been paying dividends consistently since 1980. Over the last three years, the company’s payout has grown at a 6.56% CAGR. While the four-year average dividend yield for PFE is 3.69%, the current dividend translates to a 3% yield. It paid a $0.39 per share quarterly dividend on December 6, 2021.
Analysts expect PFE’s revenue to increase 9.5% year-over-year to $808.32 billion for its fiscal year 2022. In addition, its EPS is expected to grow 23.8% year-over-year to $47.25 in the next year. Over the past nine months, the stock has gained 51.2% in price to close yesterday’s trading session at $52.08.
PFE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
PFE has an A grade for Growth and a B grade for Value, Sentiment, and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #7 of 195 stocks. Click here to see the additional POWR Ratings for Momentum and Stability for PFE.
Merck & Co., Inc. (MRK)
MRK operates as a healthcare company worldwide. The Kenilworth, N.J-based company operates through two segments: Pharmaceutical and Animal Health segments. Its Pharmaceutical segment includes human health pharmaceutical and vaccine products, while its Animal Health segment develops, manufactures, and markets a wide range of veterinary pharmaceutical and vaccine products.
On November 22, 2021, MRK announced the successful completion of its acquisition of Acceleron Pharma Inc. (XLRN). Rob Davis, the company’s CEO and the president said, “Fuelled by Acceleron’s ground-breaking research, we are excited to explore the opportunities and possibilities ahead to reach even more patients by addressing this critical health need.”
MRK’s sales increased 20.4% year-over-year to $13.15 billion for its fiscal third quarter, ended September 30, 2021. The company’s non-GAAP net income came in at $4.44 billion, up 27.3% year-over-year. In addition, its non-GAAP EPS was $1.75, representing a 27.7% year-over-year rise.
On November 30, MRK announced a $0.69 quarterly dividend per share for the first quarter of 2022. The company started paying dividends in 1990. Over the last three years, MRK’s dividend payout has grown at an 11.53% CAGR. While the four-year average dividend yield for MRK is 2.94%, the current dividend translates to a 3.79% yield.
For its fiscal year 2022, analysts expect MRK’s revenue to be $56.45 billion, representing a 15.6% year-over-year rise. The company’s EPS is expected to increase 28.3% year-over-year to $5.81 in its fiscal year 2021. The stock has gained 6.5% in price since hitting its 52-week low of $68.44 on March 4, 2021, to close yesterday’s trading session at $72.86.
MRK’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Growth and a B grade for Value and Quality. Click here to see the additional POWR Ratings for MRK (Momentum, Stability, and Sentiment). Again, MRK is ranked #3 in the Medical – Pharmaceuticals industry.
Bristol-Myers Squibb Company (BMY)
BMY develops, licenses, manufactures, and markets biopharmaceutical products worldwide. The New York City-based company offers products in hematology, oncology, cardiovascular, and immunology therapeutic classes.
On October 27, 2021, Giovanni Caforio, M.D., board chair and CEO, BMY, said, “Our teams advanced the product portfolio and achieved significant regulatory and clinical milestones, including for the fixed-dose combination of relatlimab and nivolumab. Our deep and diverse product pipeline, commercial execution and financial flexibility provide a strong foundation that is enabling the company to bring new medicines that benefit patients with serious unmet needs, drive in-line product performance and deliver sustained growth.”
BMY’s total revenues increased 10.3% year-over-year to $11.62 billion for its fiscal third quarter, ended September 30, 2021. The company’s net product sales also increased 10.3% year-over-year to $11.24 billion. And its non-GAAP EPS increased 22.7% year-over-year to $2.
BMY started paying dividends in 1970. The stock’s dividend payout has grown at a 7% CAGR over the last three years. While BMY’s four-year average dividend yield is 3%, its current dividend translates to a 3.41% yield. The company paid a $0.49 quarterly dividend on November 1, 2021.
For its fiscal year 2021, analysts expect BMY’s revenue to be $46.53 billion, representing a 9.4% year-over-year rise. In addition, the company’s EPS is expected to increase 16.5% year-over-year to $7.5 this year. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 8.1% in price since hitting its 52-week low of $53.22 on November 30, 2021, to close yesterday’s trading session at $57.54.
BMY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Value and a B grade for Growth and Quality. Click here to see BMY’s Momentum, Stability, and Sentiment rating. BMY is ranked #11 in the Medical – Pharmaceuticals industry.
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PFE shares were trading at $52.42 per share on Friday afternoon, up $0.34 (+0.65%). Year-to-date, PFE has gained 47.98%, versus a 26.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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