Look to Big Pharma for Healthy Dividends

Of the top nine members of Big Pharma with high dividend yields, Eli Lilly and Co. (LLY, Financial) brings up the rear at 1.32%. But that hardly tells the full story. The Indianapolis-based drug company with a market value of $250 billion has rewarded shareholders with stock price gains of 80% over the past year and 255% over the past five years.

At the other end of the spectrum is GlaxoSmithKline PLC (GSK, Financial). The British medicine maker, with a market cap of $104 billion, returns 5.19% to its investors. That’s some consolation given that the shares have eked out a gain of only 7%, although the stock is up 12% in the past year.

AbbVie Inc.(ABBV, Financial), meanwhile, provides a nice balance between yield and appreciation with a dividend of 4.81% as well as one- and five-year stock growth of 15% and 87%

The majority of investors probably buy large pharma stocks for price appreciation, but they would have been much better off with an S&P 500 fund. That’s because the Invesco Dynamic Pharmaceuticals ETF (PJP, Financial), which contains mostly large drugmakers, has grown only 20% over the past year and 36% during the past five, far behind the S&P’s respective gains of 30% and 114% for the same periods.

The outlook for the pharma industry looks healthy, owing to the aging population and emerging technologies that promise to speed up drug discovery and provide targeted approaches to specific diseases. According to MassChallenge, precision medicine offers a new approach to disease diagnosis, treatment and prevention. This technology uses the patient’s genes and lifestyle to help doctors make accurate, data-backed decisions.

With a compound annual growth rate of 10.7%, the precision medicine market value will exceed $96 billion by 2024. When fully implemented, precision medicine will revolutionize oncology, making possible personalized treatment for every patient.

It’s likely to take time for these new developments to be reflected in the performance of drugmakers, so investors may want to consider yields since interest rates on government securities are still minuscule, due in part to the impact of Covid-19, trade issues and an increasingly hostile China, notes 24/7 Wall Street.

Besides its healthy and regular dividend, Kiplinger is high on AbbVie, pointing to the impact of the company’s $63 billion acquisition of Allergan. The Botox maker’s contributions are starting to hit AbbVie’s bottom line and should help offset challenges to the company’s Humira, the biggest selling drug in history, which has already lost patent protection in Europe.

Another favorite of Kiplinger is AstraZeneca PLC (AZN, Financial), which recently closed on a $39 billion takeover of competitor Alexion Pharmaceuticals. With the acquisition, AstraZeneca gained several orphan drugs, which are the only treatments for serious medical problems. Alexion also brings two blockbusters, the cancer drug Soliris that fits well with AstraZeneca’s oncology offerings and a medication for a rare chronic blood disease.

Following are the nine pharma companies cited by Kiplinger for their attractive dividends: