Those are the companies that will continue to command premium drug prices and do well if new President Donald Trump fulfills a promise to rein in drug prices.We’ve identified the best bets, finding health-care dividend stocks that have diversified over the years. These companies are better equipped to withstand any new drug regulation.
With that in mind, here are three health care dividend stocks to own today:
Health Care Dividend Stocks: AbbVie (NYSE: ABBV)
AbbVie has been a relative underperformer of late, with shares down 1% over the last three months as the S&P 500 has advanced 6%. This comes as AbbVie’s top product, Humira, recently had its patent expire. The worry is that competition can now cut into AbbVie market share. However, it might not be as bad as the market expects.
Humira has been the world’s best-selling drug and AbbVie has a strong pipeline that can help mitigate any Humira losses. For example, AbbVie has a cystic fibrosis drug in Phase 1 trials that looks very promising; cystic fibrosis currently has no cure.
AbbVie’s dividend is also a draw. It pays a very handsome 4.1% dividend yield and has increased its dividend for 43 straight years (going back to the days before spinning off Abbott Labs).
Health Care Dividend Stocks: Gilead Sciences (NASDAQ: GILD)
Gilead just can’t seem to catch a break. I discussed the company last year when it was trading very cheaply; Clinton took the industry to task, and pledged to control drug prices.
Now, Gilead shares are even cheaper. That makes it perhaps an even better buying opportunity among health care dividend stocks. Shares have fallen 26% in 2016 and Gilead shares are now trading at close to six times earnings. Gilead is considered a biotechnology company, which has helped increase its share price volatility.
The biggest problem for Gilead right now is that it continues to fail drug trials. Some of its most promising drugs just can’t pass the needed trials. The company hasn’t figured out a strategy for developing its own blockbuster drugs, instead having to rely on intellectual property it’s purchased.
Gilead’s future may lie in its acquisition strategy. The failed trials may convince Gilead that it needs to use its strong cash position to buy a promising drug company. This would be a more efficient capital deployment strategy than spending on R&D.
Gilead does have a strong dividend policy; it offers a 2.5% dividend yield, which is a less than 20% payout of its earnings.
Health Care Dividend Stocks: GlaxoSmithKline (NYSE: GSK)
Paying out 4.9% dividend yield, GlaxoSmithKline is one of the leaders in the health-care space when it comes to rewarding shareholders. Still, shares are down 10% in the last six months and down 13% from the 52-week high we saw over the summer. In truth, shares of GlaxoSmithKline have been flat for the last four years as many of its drugs continue to lose patent protection.
The company really needs a catalyst for change; it could be on the cusp of a turnaround. GlaxoSmithKline is looking to transition from a drug and pharma company to one that also has strong vaccine and consumer products businesses. In particular, this includes leveraging its consumer brands like Flonase, Tums and Excedrin, to enter new markets. Trading at 14 times next year’s earnings, it doesn’t appear that the market has realized this dividend payer is amidst a key transition.
Trump said little about drug pricing during the election. But an interview in Time magazine early December put the industry on alert, when he said, “I’m going to bring down drug prices.” Then at a news conference earlier this month, Trump said that the government should negotiate directly with drug companies to help with the pricing issue, saying the drug companies are “getting away with murder.”
With that, the three health care dividend stocks above are well-positioned to fend off drug-pricing threats and they offer solid dividends to help with downside protection.