Healthcare Business

Why Dividend-Paying Big Drug Companies May Be the Best Stocks to Own Now

If you had gone off the grid in early January with no communication and just came back, you would see all the market indexes making new highs, but the levels are close to when you left. In reality, investors experienced officially the largest 100 day rally ever for the S&P 500 Index, up more than 50%. The problem for investors now, despite the all-time highs, is the market is very overbought, the economy is a mess, millions of people are unemployed or furloughed, and the United States is at staggering debt levels, which as a percentage of gross domestic product are closing in on World War II levels.

Investors usually could retreat to the bond market, but the 30-year U.S. Treasury bond pays a minuscule 1.41% coupon, which barely keeps up with taxes and inflation. One good area to look at now is large-cap pharmaceuticals, many of which are involved in the search for a COVID-19 vaccine.

We screened our 24/7 Wall St. research database looking for dividend-paying large-cap pharmaceutical stocks that are rated Buy at major Wall Street firms. These five look like outstanding ideas for nervous investors looking for income and a degree of safety. While all are rated Buy at top firms, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AbbVie

This is one of the top pharmaceutical stock picks across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.

One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so last June it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of this year.

AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.

Shareholders receive a 5.00% dividend. RBC has a $127 price target for the shares, which is higher than the Wall Street consensus target of $108.56. AbbVie stock closed trading on Wednesday at $94.35 a share.

Bristol-Myers Squibb

This remains a solid pharmaceutical stock to own long term. 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 reported strong second-quarter results that were largely ahead of Wall Street consensus, given the ongoing recognition of Celgene revenue. Bristol-Myers bought Celgene last year in a massive $74 billion acquisition. The posted quarterly earnings of $1.63 per share exceeded the Wall Street consensus estimate and were higher than the per-share earnings reported in the same period a year ago.

Shareholders receive a 2.96% dividend. The BofA Securities price target is $80, while the consensus target is $72.08. Bristol-Myers Squibb stock closed at $61.43 on Wednesday.