Despite the howling from political candidates trying to make the top drug-makers their whipping boy in populist campaign efforts, the need and demand for pharmaceuticals will only continue. This is especially the case when you consider that we now live in a world with an aging population that is going to be popping more and more doctor-prescribed pills.
While pricing and cost concerns won’t go away completely until the election cycle winds down, now may be an ideal time to add the top yielding stocks to portfolios for 2016.
24/7 Wall St. has screened the Merrill Lynch research universe for the top pharmaceutical stocks that are rated as Buy at the company that also which also pay investors solid dividends. The companies we found have long histories of paying and raising their dividends, and make good sense for conservative growth and income portfolios.
This is a top pharmaceutical stock with very solid growth potential. Abbott Laboratories (NYSE: ABT) is a leading diversified global healthcare company that develops, manufactures and markets branded generics, medical devices, nutritional products, and diagnostic solutions. The company recently agreed to acquire the equity in Minnesota-based Tendyne Holdings that it does not already own for $250 million plus future payments tied to regulatory milestones. The Merrill Lynch team likes the purchase and the way the company is putting their substantial balance sheet to work.
The company also offers a diversified large cap play as earnings are split between five well positioned business segments: Nutritional (31% of revenues), Vascular (13%), Generic Pharmaceuticals (20%) and Diagnostics (25.5%) and Diabetes (10.5%).
Abbot posted solid third quarter earnings and the emerging market sale growth continues to impress. Merrill Lynch has advised investors since the August sell-off to stay with the company.
Abbot investors are paid a 2.11% dividend. The Merrill Lynch price target for the stock is $53, and the Thomson/First Call consensus is at $50.97. Shares closed Monday at $45.44.
This stock checks in at high on the global pharmaceutical lists at many top Wall Street firms and is on the Merrill Lynch US1 list. Eli Lilly and Company (NYSE: LLY) is a global healthcare company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.
The product portfolio includes Zyprexa (schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder – ADHD), Erbitux (cancer) and Alimta (chemotherapy). Lilly also has a strong presence in the diabetes market.
Lilly reported third quarter earnings $0.89, which was above the consensus of 0.76. Third-quarter revenues came in just under consensus is at $4.959 billion, reflecting some potential generic competition for Cymbalta and Evista in the U.S. as well as some negative currency movement. Trajenta, Strattera, Forteo and the animal health business should all help to offset the impact of genericization of former top selling drugs.
The company’s new cancer drug Cyramza won FDA approval for label expansion recently. It treats patients suffering from metastatic colorectal cancer (mCRC). This was the fourth Cyramza approval in a one year period; it already has approval to treat advanced or metastatic gastric or gastroesophageal junction adenocarcinoma and metastatic non-small cell lung cancer (NSCLC). Cyramza has so far generated sales of $67.5 million.
The Merrill Lynch team and other analysts on Wall Street love the company’s product pipeline and point to Lilly’s Solanezumab drug for Alzheimer’s phase 3 data which had positive clinical results reported in late July, and Jardiance, the company’s drug for diabetes posted very positive clinical results.
Lilly shareholders are paid a solid 2.37% dividend. The Merrill Lynch price target for the stock is $104, and the consensus price target for the stock is $96. Shares closed Monday at $84.74.