4 UBS Most Preferred Pharmaceutical Stocks That Pay Big Dividends

May 25, 2016 by 247lee

Needless to say, the health care sector, especially pharmaceuticals and biotech, have taken a rhetorical beating from politicians looking to force the blame for high drug prices on some of the top companies. While prices on some are indeed high, and perhaps should be lowered, the fact of the matter is, it is incredibly expensive to get a new drug to approval and the market. The selling of these stocks could give investors a great entry point.

One of the firms we cover here at 24/7 Wall St. is UBS, and it is cautiously positive on the overall health care sector. The analysts have the sector rated moderate overweight, and the preferred segments are pharmaceuticals and healthcare providers and services. We found four stocks in the Most Preferred Pharmaceuticals list that pay top dividends.

AbbVie

This is the top global pharmaceutical stock at Jefferies. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company’s mission is to use its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. AbbVie employs more than 26,000 people worldwide and markets medicines in more than 170 countries.

One of the biggest concerns with AbbVie is what eventually might happen with anti-inflammatory therapy Humira, which generated $14 billion in sales in fiscal 2015. That was the most any drug has recorded during a single year and represents a gigantic part of the company’s overall earnings. The problem is that biosimilars and generics are itching to enter the market with Amgen leading the charge.

Some Wall Street analysts project that AbbVie may have a difficult time stopping that trend. Jefferies has become much more positive on the stock and feel that the company’s response to the Coherus inter partes review (IPR) on key Humira patents looks solid and an IPR denial is a very real possibility.

Back in January, senior management at the company gave sales guidance that calls for Humira sales to climb, rather than shrink, to $18 billion by 2020. If so, then AbbVie still has time to build momentum for other drugs that can offset any future impact from biosimilars.

AbbVie investors are paid an outstanding 3.76% dividend. The Thomson/First Call consensus price target is posted at $71.06. The stock closed most recently at $60.70 per share.


Bristol-Myers Squibb

This top company remains a favorite at UBS. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.

The company recently announced that the FDA has approved Opdivo for the treatment of classical Hodgkin lymphoma in patients who have relapsed or progressed after autologous hematopoietic stem cell transplantation and post-transplantation Adcetris. The accelerated approval of Opdivo in the cHL indication was based on the overall response rate. This marks the very first PD-1 inhibitor to be approved for a hematological malignancy.

Bristol-Myers shareholders are paid a 2.15% dividend. The $76.29 consensus price target compares with the most recent closing share price of $71.23.

Eli Lilly

This top pharmaceutical should do just fine regardless of headline risk in the summer. Eli Lilly and Co. (NYSE: LLY) is a global health care 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 (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.

Reported first-quarter earnings and revenue came in just slightly under consensus. While the overall numbers were unremarkable in the analysts view, the Merrill Lynch team is still very focused on the company’s outstanding late-stage product pipeline, which they view as very undervalued. Eli Lilly did however raise the company’s 2016 earnings per share and revenue guidance to above the consensus estimates.

Shareholders are paid a solid 2.75% dividend. The consensus price target for the stock is $95.71, and shares closed on Tuesday at $74.99.

Pfizer

This top pharmaceutical company recently made a gigantic bid for Anacor Pharmaceuticals. Pfizer Inc. (NYSE: PFE) has a very strong pipeline, and being the world’s largest drug manufacturer by sales value supports the Wall Street notion that the company can generate higher long-term revenues through the accelerated growth of its new drugs over the next five years.

The Treasury Department announced new rules for corporate tax inversions, which effectively scuttled Pfizer’s deal with Allergan. With the deal over, not only are the risk arbitrage funds buying the stock back, but some felt there was as much as a $5 weight on the stock, but top analysts now feel that investors can once again focus on the sum-of-the-parts story, which they feel is compelling, in addition to making accretive purchases like Anacor.

Pfizer has announced that it is starting 20 clinical trials this year, and more soon after, on treatments to conquer cancer, as it also seeks to gain leadership in one of the hottest and most lucrative areas of medicine. Hedge funds seem to like the stock as a total of 22 own it now.

Pfizer investors are paid a rich 3.52% dividend. The posted consensus price target for the stock is $38.62. The stock closed Tuesday at $34.10 per share.


Despite the ongoing political candidate chirping, all of these quality big pharmaceutical stocks have been around, and they will continue to stay around. Investors may want to buy partial positions and watch how the election cycle plays out.