2 Best Biotech Stocks to Buy Right Now

The launch of quality healthcare services and products over the past several decades has had an overwhelmingly positive impact on society. That’s because these goods and services can prevent or treat many chronic medical conditions, which has resulted in an improved quality of life for many patients.

Here are two established pharma stocks whose products have played important roles in the lives of millions of patients around the world. Let’s dig into why each stock appears to currently be a buy for dividend investors.

Doctor discussing with elderly patient.

Image source: Getty Images.

1. Amgen

Amgen‘s (NASDAQ: AMGN) $131.5 billion market capitalization comfortably makes it a large-cap stock. Unsurprisingly, the company enjoys both a stacked drug portfolio and a deep pipeline of drugs.

Amgen’s portfolio included 28 drugs in the first quarter of 2022. And nine of these drugs are on track to generate at least $1 billion in revenue for the year. Six of these nine drugs recorded revenue growth in the first quarter. This was led by double-digit growth from the cholesterol-lowering drug Repatha, osteoporosis drug Prolia, and multiple myeloma drug Kyprolis.

This explains how Amgen’s revenue grew 5.7% year over year in the first quarter to $6.2 billion. And aside from the company’s current drug portfolio, Amgen has 38 compounds in different stages of clinical trials. These compounds are spread across such therapeutic areas as oncology, inflammation, and bone. That’s why analysts believe Amgen will generate 7.1% annual earnings growth through the next five years.

And Amgen’s market-beating 3.2% dividend yield appears to be sustainable. This is because the stock’s dividend payout ratio will be 44.5% in 2022, which gives Amgen the flexibility to grow its dividend in line with its earnings. This should lead to high-single-digit annual dividend growth over the medium term, which makes the stock an attractive mix of both current and future income.

Amgen isn’t one of the most compelling values out there. But at a forward price-to-earnings (P/E) ratio of 14.1, the stock is trading at a similar valuation to the 13.4 forward P/E ratio of its pharmaceutical peers. That’s why Amgen looks like a buy for dividend growth investors at the current $246 share price.

2. Merck

Merck‘s (NYSE: MRK) $224.5 billion market cap comfortably makes it a mega-cap stock. This isn’t shocking considering that the company’s product Keytruda is the top-selling cancer drug in the world — and the second-highest-grossing drug in the world behind immunology drug Humira. And when AbbVie‘s U.S. patent for Humira expires in 2023, Keytruda will likely claim its spot as the overall best-selling drug in the world.

But what many investors overlook is that Merck is much more than the $4.8 billion in revenue that Keytruda produced in the first quarter of 2022. The company’s COVID-19 antiviral treatment Lagevrio recorded $3.2 billion in revenue during the quarter. And Merck’s human papilloma virus vaccine Gardasil logged $1.5 billion in revenue in the first quarter, which was a double-digit growth rate over the prior year. Finally, Merck’s animal health segment posted $1.5 billion in revenue during the quarter. This was a 4.5% year-over-year growth rate.

And with a late-stage pipeline of 106 projects, Merck boasts a diversified drug portfolio of tomorrow. This is why analysts are projecting 11.6% annual earnings growth for the next five years.

The company’s 3.1% dividend yield also seems to be safe. That’s because the stock’s dividend payout ratio will be 37.6% in 2022. This should allow for healthy dividend growth moving forward.

Merck looks like a downright bargain in the pharmaceutical industry. The stock’s forward P/E ratio of 12.1 is moderately lower than the industry average of 13.4. Merck’s quality and valuation make it a dividend stock that you can buy now and forget.

10 stocks we like better than Amgen
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Amgen wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of June 2, 2022

Kody Kester has positions in AbbVie, Amgen, and Merck & Co. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Leave a Reply

Your email address will not be published.

Back to top button