Five Dividend-paying Pharmaceutical Investments to Buy

Five dividend-paying pharmaceutical investments to buy are poised for a boost from new product pipelines.

The five dividend-paying pharmaceutical investments to buy overshadow their peers even though that sector’s performance has been “underwhelming” compared to the broader market with the S&P 500 up 15.51%, compared to a 6.08% drop for biotechnology stocks in the past year, according to a recent BofA Global Research report. A key reason is that sector rotation in the market has put biotechnology at out of favor against a macro-economic scenario of a “soft landing,” according to the report.

The focus for investors interested in exposure to large pharmaceutical investments is to assess a company’s strength of “commercial execution,” versus macro risks, BofA wrote in its research note. With third-quarter earnings season just starting, biopharmaceutical companies with promising products should stand out.

Despite headwinds of food and energy inflation, an expanding auto strike and diplomatic challenges in the Middle East, Ukraine, Russia and China, the market is holding its value better than many observers may expect, Perry wrote to his Cash Machine subscribers. Nonetheless, investors with a collective $5.5 trillion are content to collect 5%-plus in guaranteed short-term cash instruments and Treasuries, he added.

Paul Dykewicz interviews Cash Machine investment newsletter leader Bryan Perry.

Five Dividend-paying Pharmaceutical Investments to Buy: Income and Growth

The five dividend-paying, pharmaceutical investments to buy offer both income and a chance for capital appreciation. Perry, who currently averages a dividend yield of 10.8% with Cash Machine’s 29 recommendations, recently wrote that investors can take heart from the Personal Consumption Expenditures (PCE) index data released by the U.S. Bureau of Economic Analysis on Sept. 29. The data showed overall inflation slipping below 4% on an annual basis. When excluding volatile food and energy prices, the latest rise in the key inflation gauge of the Federal Reserve was only 0.1%, a 3.9% rise from the same time the previous year.
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Five Dividend-paying Pharmaceutical Investments to Buy: Eli Lilly

Indianapolis, Indiana-based Eli Lilly & Co. (NYSE: LLY) is one of five pharmaceutical investments to buy that are propelled by their product pipelines. The stock gained the attention of co-editors Mark Skousen, PhD, and Jim Woods of the Fast Money Alert trading service that recommends both stocks and options.

Mark Skousen, head of Five Star Trader and scion of Ben Franklin, talks to Paul Dykewicz.

Five Dividend-paying Pharmaceutical Investments to Buy: Obesity Treatment

Lilly makes a diabetes shot called Mounjaro that its management is hoping will gain Food and Drug Administration (FDA) approval later this year as an obesity treatment. Lilly’s leaders also discussed working on a next-generation diabetes and weight-loss drug called Retatrutide.

Strong revenue and earnings growth at LLY, along with the promise of millions in additional revenue each quarter for its next-generation weight-loss drug, sent the stock soaring. During the past 52 weeks, shares are up 80.74%. Lilly’s share price performance puts it in the top 2% of all stocks on a relative price strength basis.

As shown by the chart below, LLY shares are trending up, climbing 2.75% in the past month and 30.51% in the past three months to show a bullish cup-with-handle pattern. That performance bests its industry, which is down 7.71% in the last month.

Paul Dykewicz meets with Jim Woods, head of Intelligence Report.

The co-leaders of the Fast Money Alert trading service profited by recommending Lilly last year. The duo produced a 11.06% total return in barely five months on October 17, 2022, after its recommendation on May 16, 2022. Now, they are looking to help their subscribers to cash in again.

Chart Courtesy of www.stockcharts.com

BofA recently increased its price objective on Lilly to $700 due to the company’s clinical and commercial success, with the bullishness based partly on tirzepatide’s likely approval as an obesity treatment during the fourth quarter this year and the company’s incretin pipeline featuring orforglipron and retatrutide. In addition, Lilly has been putting its cash to work with a slew of mergers and acquisitions (M&A) activity, including buying Versanis, Sigilon, DICE and POINT Biopharma, which BofA wrote investors seem to view favorably.

Five Dividend-paying Pharmaceutical Investments to Buy: Bristol-Myers Squibb

BofA also has a “Buy” recommendation on Bristol-Myers Squibb (NYSE: BMY), of Princeton, New Jersey. With the third quarter underway, commercial performance from core products such as Opdivo and Eliquis, as well as nine significant new product launches, likely will be top of mind for most investors, BofA opined.

With solid growth forecast for Opdivo of 13% year over year (y/y), for Eliquis of 8% (y/y) and the Big 9 new launches soaring 80% (y/y), BofA wrote it will take the company a few more quarters for Camzyos and Sotyktu to reach an inflection point. Further, cell therapy products like Abecma and Breyanzi are facing current headwinds from manufacturing and supply, BofA wrote.

BofA continued that it continues to view Bristol’s shares as attractive, given its robust new product cycle and reasonable valuation of 8x forward P/E, compared to 16x for its peers. The investment firm reiterated its buy rating and $80 price objective on BMY.

Skousen previously recommended Bristol-Myers Squibb profitably in his TNT Trader service that features both stocks and options. In less than two months after he advised its purchase on December 10, 2019, he told his subscribers to take a profit. His related call option recommendation turned a profit, too.

Chart Courtesy of www.stockcharts.com

Five Dividend-paying Pharmaceutical Investments to Buy: Merck

Merck & Co. Inc. (NYSE: MRK), of Rahway, New Jersey, is poised to deliver another solid commercial third quarter, driven by strong growth from core products such as Keytruda and Gardasil, BofA wrote. Indeed, BofA added that it expects robust growth of Keytruda in 3Q, spurred by recent approvals in adjuvant lung, continued market penetration and solid data updates.

The investment firm expects strong demand, aided by increased supply due to new manufacturing capacity in 2023/24. Looking ahead, BofA forecast investors likely will focus on FDA approval and launch of sotatercept in the first half of 2024. Market uptake could be robust, given the close-knitted community and treatment centers, BofA added.

“Ultimately, we remain bullish on MRK shares, given its strong core business,” BofA wrote in a recent research note.

BofA reiterated its buy rating on Merck and set a price objective of $130 per share.

Chart Courtesy of www.stockcharts.com

Five Dividend-paying Pharmaceutical Investments to Buy: Stocks and Funds

Another keen observer of the industry is Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter that features various portfolios. As a risk-averse pension fund leader, Carlson favors funds to gain diversification and reduce risk.

“I still believe biotech and pharmaceuticals will do well, though they haven’t done well recently,” Carlson told me. “The companies continue to develop new, innovative products.”

Bob Carlson, head of Retirement Watch, gives an interview to Paul Dykewicz.

For a broad-based exposure to biotechnology, consider the ETF iShares Biotechnology (IBB), Carlson advised. The fund tracks the ICE Biotechnology Index, which consists of U.S.-listed companies. IBB owns mostly large and mid-cap companies, with about 20% of the fund in small and micro-cap firms.

IBB recently had 261 stocks, but 56% of the fund was in the 10 largest positions. Top positions were Amgen, Vertex, Regeneron, Gilead Sciences and Seagen. The turnover rate is only 13%.

The fund lost 13.69% in 2022 and is down 10.59% so far in 2023. It lost 9.94% in the last three months and 0.09% during the past 12 months. The dividend yield is around 0.25%.

Chart Courtesy of www.stockcharts.com

Five Dividend-paying Pharmaceutical Investments to Buy: FTXH Offer Another Alternative

Investors who want to focus exclusively on pharmaceuticals may like First Trust Nasdaq Pharmaceuticals (FTXH), Carlson counseled.

The fund tracks the pharmaceutical index in its name. About 55% of the fund is in stocks that Morningstar classifies as either giant or large. The ETF’s stocks on average sell at lower valuations than other health care companies. Almost all the Fund’s holdings are listed in the United States.

FTXH recently owned 50 stocks, and its 10 largest positions were 56% of the fund. Top holdings were AbbVie, Johnson & Johnson, Merck & Co., Pfizer and Bristol-Myers Squibb. The turnover ratio is 76%.

The fund gained 2.55% in 2022 but is down 7.72% so far in 2023. It slid 5.28% in the last three months but rose 3.45% in the past 12 months. Its dividend yield is around 1.67%.

Chart Courtesy of www.stockcharts.com

Five Dividend-paying Pharmaceutical Investments to Buy: Rising Political Risk

The Oct. 7 Hamas attack of Israel that triggered a war and Russia’s sustained invasion of Ukraine that started in February 2022 are two key remains elevated political risk exists for investors. Political risk could rise further with the Russian Defense Ministry releasing documents recently showing its military spending could rise by more than 68% in 2024 to reach $111.15 billion. That amounts to about 6% of Russia’s gross domestic product (GDP), more than the country’s spending on social programs, according to Moscow Times. Russia’s military spending is set to total about three times more than education, environmental protection and health care spending combined.

On Oct 18, President Biden made a wartime trip to Israel to tell people there and throughout the world that the United States stands with its ally as it seeks to defend itself from Hamas that carried out an attack starting on Oct. 7 that killed more than 1,300 people inside the country’s borders. Biden compared the sneak attack against Israel as similar to what America faced on September 11, 2001, when terrorists struck the United States and killed 2,977 people.

In recent days, the United States deployed two carrier groups to the eastern Mediterranean to deter Iran, Syria and Hezbollah from waging war with Israel. Two thousand US Marines currently are on hard standby for deployment to the region, if needed.

The five dividend-paying pharmaceutical investments to buy offer the appeal of both income and potential capital appreciation. Despite the heightened political risk, dividend-paying biopharmaceutical stocks should have extra staying power for investors willing to buy their shares amid a volatile market.

Paul Dykewicz, www.pauldykewicz.com, is an award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.