Although many biotech stocks have been hit hard at the start of 2019 while the general market has rallied, this underperformance in the biotechnology space has presented at least two key benefits for investors looking to invest in the area.
First, and perhaps the most obvious, is that being able to enter biotech stocks at a cheaper price — assuming the companies are not fundamentally broken — is much better than going in while the stocks are overpriced or in “rally mode”. Second, in situations like this, companies’ dividend yields go up.
What all of this means is that despite the seemingly grim picture for biotech, there are actually several solid biotech dividend stocks to invest in now. The struggle is sifting through all the names and finding which of them are the best dividend stocks to invest in.
But don’t worry, I’ve done the hard work for you. Below are three of the best biotech dividend stocks to buy now.
AbbVie (NYSE:ABBV) trades at a modest price-to-earnings ratio of 21X, while shares yield 5.45%.
Although short-term investors might be concerned that ABBV shares have been on a downtrend since topping in May 2018 at $122, there is still plenty of longer-term potential in ABBV to be hyped about.
Much of the downside ABBV experienced occurred after its latest earnings report. AbbVie reported fourth-quarter adjusted profits that grew a solid 28% over last year; at $1.90 a share, the company achieved its guidance for the quarter. But the stock gave up around $10 a share, falling from $88 to around $78, after the report. Investors fretted over the 15% drop in international Humira sales. Biosimilar competition in Europe, which makes up 75% of its international Humira business, was expected.
However, generic competition for its flagship drug does not concern ABBV management. It’s likely that they’re banking on a slew of new product releases in 2019 to offset the aggressive discounting from competitors.
In fact, AbbVie is funding five major products for launch indications this year. This should drive revenue higher and lead to double-digit earnings-per-share growth for the company. All of which makes it one of the notable biotech dividend stocks to buy.
Allergan plc (NYSE:AGN) ended its last rally in October 2018, with AGN shares finally bottoming by the end of last year at around $130. The stock fell again from $160 to a recent price of $144 after reporting Q4 results.
Right now, AGN shares will pay you a modest 2.1% dividend. And if the stock rebounds, the total return will be higher.
The botox specialist reported $4.08 billion in revenue, down 5.7% from last year. Non-GAAP income fell 15.4% to $1.45 billion. Encouragingly, sales of Botox rose 9.4%, while the Juvederm collection, Lo Loestrin and Vraylar all rose in the double digits. Although these products are a smaller part of total revenue, it is enough for management to forecast revenue of $15 billion – $15.3 billion this year.
With management forecasting lighter results for the year, why should investors buy AGN stock for the dividends? The firm has six late-stage clinical programs, plans of one to two new product launches annually and the company has strong margins. It made $5.64 billion in operating cash flow last year. This is more than the $976 million it needs for the dividend.
After settling at around $42 at the start of 2019, Sanofi (NASDAQ:SNY) rallied steadily to close at around $43.45 recently. Now, at its 50-day simple moving average, shares have a dividend yield of 4.28%.
Sanofi’s underperformance is unusual. Other than trading at a slightly higher valuation at a P/E of 22X, the company did not report any negative news. If anything, the collaborations that this biotech firm has with Regeneron Pharmaceuticals (NASDAQ:REGN) should bolster investor confidence. Regeneron’s Dupixent is becoming a blockbuster hit for treating Atopic Dermatitis. Alongside its efforts with REGN, SNY is also supplying the active ingredient of avanafil to Vivus (NASDAQ:VVUS).
Another promising aspect bolstering the case for SNY stock is that on Jan. 23, the Food and Drug Administration approved the use of Sanofi’s Fluzone in young children.
When it reports earnings on Feb. 7, the company should not bring up any negative surprises. It should be consistent like Q3’s report where the company reported sales growing 6.3% (at constant exchange rates). Its Bioverativ acquisition should continue to contribute meaningfully to sales.
Looking ahead, an EMA decision in the first half of this year for its oncology drug Libtayo, plus an FDA action date of Feb. 6 for Cablivi, which treats a rare blood disorder, should keep investor confidence high.
As of this writing, Chris Lau held shares of ABBV.