Many prognosticators across Wall Street feel that interest rates will start to rise in 2021 Deutsche Bank is negative on duration and sees the 10-year Treasury bond yield rising to 1.5% in the second quarter of 2021 from the current yield of 0.95%. While that kind of move would be tough for the bond market, it would have little if any effect on dividend-paying stocks. One area looks like a solid place for investors next year is large-cap pharmaceutical stocks.
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The current stock market is massively overbought, sentiment is ultra-bullish and the purchase of call options by small investors has skyrocketed. That’s always a sign of a very risky market. With all of the major indexes printing all-time highs, rotating from overbought and crowded momentum stocks to dividend-paying big pharma now makes sense.
We screened our 24/7 Wall St. research database for pharmaceutical leaders that pay solid and dependable dividends and are rated Buy at top Wall Street 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 stocks picks across Wall Street, and 34% of the fund managers own the shares. 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 in June of 2019 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 4.80% dividend. Morgan Stanley recently lifted the price target to $120 from $108. The Wall Street consensus target is $112.05, and AbbVie stock traded early Thursday near $108.
Bristol-Myers Squibb
This remains a solid pharmaceutical stock to own long term and offers among the best values now for investors. 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.
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The company’s products include the following:
- Opdivo for anti-cancer indications
- Eliquis, an oral inhibitor targeted at stroke prevention in adult patients with non-valvular atrial fibrillation, and the prevention and treatment of venous thromboembolic disorders
- Orencia for adult patients with active RA and prostate-specific antigen, as well as reducing signs and symptoms in pediatric patients with active polyarticular juvenile idiopathic arthritis.
Shareholders receive a 2.96% dividend. The $80 BofA Securities price target compares with the $74.29 consensus target. Bristol-Myers Squibb stock was trading above $60.50.
24/7 Wall St.Johnson & Johnson
With a diverse product base and a very popular and solid brand, this is among the most conservative big pharmaceutical plays, and 44% of fund managers own the stock. Johnson & Johnson (NYSE: JNJ) is one of the top market cap stocks in the health care sector and raised its dividend this year for the 56th consecutive year. With everything from medical devices to over the counter health items and prescription drugs, the company remains one of the most diversified health care names on Wall Street.
The health care giant also has one of the most exciting pipelines of new drugs in the sector. That combined with the solid over-the-counter product business makes the stock an outstanding holding for conservative accounts with a long-term investment outlook. The company generates a little over half of its sales in international markets, which are expected to see higher spending on health care over the next 10 years and beyond.
The dividend was raised in the spring to $1.01 per share, which equals a 2.64% yield. BofA Securities has a $175 price target. The consensus target is $166.18, and Johnson & Johnson was last seen trading around $152.
Merck
This remains a leading health care stock for conservative investors. Merck & Co. Inc. (NYSE: MRK) offers therapeutic and preventive agents to treat cardiovascular issues, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal infections, intra-abdominal infections, hypertension, arthritis and pain, inflammatory, osteoporosis, male pattern hair loss and fertility diseases.
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The company also provides neuromuscular blocking agents for use in surgery, anti-bacterial products for skin and skin structure infections, cholesterol modifying medicines, non-sedating antihistamine and vaginal contraceptive products.
Holders of Merck stock receive a 3.11% dividend. Goldman Sachs recently upgraded the shares to Buy and raised the price target to $105 from $91. The consensus target is $95.89. The shares were trading above $83.
Pfizer
This is a top pharmaceutical stock and appears to be one of the big winners in the COVID-19 vaccine races. Pfizer Inc. (NYSE: PFE) is a global biopharmaceutical company with a diversified portfolio of products and pipeline candidates, and it is one of the largest pharmaceutical companies in the world as measured by market capitalization and revenue.
The active ingredient in the company’s vaccine is messenger RNA, which carries instructions for making the virus’s spike protein that it uses to gain entry to cells. The mRNA is synthetic, not extracted from actual viruses. Pfizer announced last week that the Medicines & Healthcare Products Regulatory Agency (MHRA) in the United Kingdom has granted a temporary authorization for emergency use for its mRNA vaccine against COVID-19.
Shareholders receive a 3.75% dividend. The Royal Bank of Canada’s price target is $43, while the consensus target is $41.68. Pfizer traded below $42 Thursday morning.
The solid total return potential is almost outweighed by the fact that all these companies are very defensive from a risk standpoint, and with the market very overbought, and due for a breather, they make sense to shift some capital to now. From a total return standpoint, this may be one of the best ideas for 2021.
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