Investing in dividend stocks requires more than finding high-yielding firms. Sometimes firms' yields rise when their share prices drop, which may indicate that the company is in danger and may have to cut payouts. Therefore, before investing in a high-yield dividend stock, make sure its underlying business is robust and will likely raise its dividends.
AbbVie (NYSE: ABBV) and Gilead Sciences (NASDAQ: GILD) are two stocks with yields above the S&P 500 average worth purchasing and holding.
1. AbbVie All good things end. AbbVie lost U.S. patent exclusivity for its Humira medication last year. All drugmakers face patent cliffs, but Humira's success made this loss important. The key concern is whether the company can recover from a brief sales drop. Yes, it appears.
In addition to Skyrizi and Rinvoq, AbbVie's Botox franchise, depression treatment Vraylar, and cancer medicine Venclexta are bestsellers. Skyrizi and Rinvoq should surpass Humira's peak sales and generate $27 billion by 2027, according to AbbVie. Long ago, management predicted competitors would struggle to make Botox biosimilars.
One reason AbbVie bought Allergan for $63 billion in 2020. Later, AbbVie's fresh approvals should matter. This includes 2021 migraine therapy Qulipta and last year's U.S. cancer drug Epkinly. Qulipta's 2023 sales increased to $408 million. In a few years, sales should approach $1 billion.
New and improved products will come from AbbVie's pipeline. The key to patent cliff survival. Based on its dividend history, AbbVie has much to offer income seekers. Its rewards have risen for 52 years. AbbVie's forward dividend yield is 3.47%, greater than the S&P 500's 1.47%. Its 48% cash payout ratio means it can cover dividends and raise them. Despite its recent challenges, AbbVie's dividend profile and prospects are good.
2. Gilead Sciences Gilead Sciences has modest revenue growth. The company's 2023 top line fell 1% to $27.1 billion. The biotech's coronavirus portfolio hurt its finances. Gilead Sciences' sales rose 7% last year without Veklury, its COVID-19 antiviral. After Veklury fades, Gilead Sciences should do better.
The company counts on its market-leading HIV portfolio, led by U.S. No. 1 recommended regimen Biktarvy. Gilead Sciences held 70% of the U.S. HIV treatment market and 40% of PrEP in the fourth quarter. Biktarvy's sales rose 14% to $11.8 billion last year. The drug received another label expansion for HIV patients with a frequent treatment resistance in February, which might boost sales.
Gilead Sciences' latest drugs should have an impact. Sunlenca (lenacapavir), a long-lasting HIV regimen, was licensed in late 2022 and is undergoing many clinical investigations that should lead to label expansions. Gilead is expanding its oncology portfolio, which fared well last year. In 2023, its oncology revenue rose 37.1% to $2.9 billion.
Gilead Sciences has grown its oncology pipeline in recent years, albeit it still accounts for a tiny percentage of sales. Later essential approvals should follow. Investors shouldn't be alarmed by Gilead Sciences' recent decline because of its innovative history. The biotech pays good dividends. Over five years, its rewards have climbed 22%. At 51%, its cash payout ratio is respectable and its dividend yield is 4.10%. Gilead Sciences' dividend program is reliable.
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