It has become the proverbial broken record. Every time it seems like yields on government securities will start trending higher, they roll over again. There are a variety of reasons, including everything from a spike in COVID-19 due to the Delta variant, which may slow the economy again, to worries over trade issues and an increasingly belligerent China. One thing is for sure. Though the Federal Reserve is hinting at finally slowing quantitative easing, even if yields do reverse, it will take years before they get back to normal levels.
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So once again, what are growth and income investors to do? One outstanding sector to look at is pharmaceuticals, especially the big companies that have consistently paid and raised their dividends. We found four stocks that are rated Buy by top Wall Street firms and look like very good ideas for investors, especially now that the market is overbought and the slow seasonal market months are right around the corner.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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AbbVie
This is one of the top pharmaceutical stock picks across Wall Street, and 34% of fund managers own the shares. AbbVie Inc. (NYSE: ABBV | ABBV Price Prediction) 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 last 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 4.47% dividend. SVB Leerink has Wall Street’s high price target of $144. The Wall Street consensus target is just $124.08, and AbbVie stock closed trading on Tuesday at $116.25.
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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.
Bristol Myers Squibb 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 2.83% dividend. The $94 Goldman Sachs price target is well above the consensus target of $75.37. Bristol Myers Squibb stock closed at $69.31 on Tuesday.
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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.
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.
Shareholders receive a 3.40% dividend. The Truist Securities price target of $93 is right in line with the $93.02 consensus target. Merck stock closed on Tuesday at $76.41 a share.
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Takeda
This top Japanese pharmaceutical company is somewhat off the radar but pays an outstanding dividend, and its stock may have the biggest upside potential. Takeda Pharmaceutical Co. Ltd. (NYSE: TAK) engages in the research, development, manufacturing, marketing and out-licensing of pharmaceutical products worldwide.
It offers pharmaceutical products in the areas of gastroenterology, oncology, neuroscience and rare diseases, as well as plasma-derived therapies and vaccines. Takeda provides its products under the Entyvio, Gattex/Revestive, Alofisel, Natpara, Adynovate/Adynovi, Takhzyro, Elaprase, Vpriv, Gammagard Liquid/Kiovig, Hyqvia, Cuvitru, Albumin/Flexbumin, Ninlaro, and Alunbrig brands.
Takeda has licensing agreements with Denali Therapeutics and Wave Life Sciences, collaboration agreements with Neurocrine Biosciences and Rani Therapeutics, and license and research agreements with the University of Texas MD Anderson Cancer Center and Arrowhead Pharmaceuticals. It has research collaboration agreements with Arrowhead Pharmaceuticals and Ovid Therapeutics, a collaboration with Evox Therapeutics, as well as a licensing agreement with ProThera Biologics. It also has strategic alliances with Egle Therapeutics, Evotec, Neurocrine Biosciences, Carmine Therapeutics and more.
Investors receive a 4.41% dividend. BofA Securities has set a $22.40 price target. The consensus target is $21.78, and Takeda Pharmaceutical stock closed on Tuesday at $16.63.
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Another very good reason for investors to consider these top companies is that, with a market that hasn’t had a 5% correction in almost a year, something has to give. Maybe not today or tomorrow, but all signs are flashing yellow, and soon that red light will come up. While not impervious to being sold, these are classic defensive names that will hold up much better than crowded momentum stocks.
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