In this article, we discuss 13 best pharma dividend stocks to buy in 2024. You can skip our detailed analysis of the pharma sector and its performance, and go directly to read 5 Best Pharma Dividend Stocks To Buy in 2024.
Within the healthcare industry in the US, the pharmaceutical sector has experienced significant transformations in recent times. These changes include the influence of the COVID-19 pandemic, the formation of collaborations spanning the entire value chain, and a continuously evolving regulatory landscape. The US pharmaceutical market is the largest in the world, both in terms of revenue and innovation. It plays a crucial role in global healthcare and pharmaceutical research and development. According to S&P Global Ratings, major pharmaceutical companies collectively earned around $700 billion in revenue during 2023, which includes some additional revenue sources beyond pharmaceuticals. This amount constitutes over half of the estimated $1.1 trillion global pharmaceutical market. Moreover, the US accounts for approximately 40% to 50% of the total revenues in the global pharmaceutical industry. The US market is particularly appealing to branded pharmaceutical companies due to substantially higher prices and profit margins compared to other regions.
Beyond the financial returns of the pharmaceutical industry in the US, its innovation stands out on the global stage. In recent times, there have been significant advancements in vaccine development, cancer treatments, GLP-1 drugs for managing obesity, gene therapy, gene editing technology for rare diseases, and novel treatments for complex illnesses such as Alzheimer’s disease. However, despite these achievements, the sector grapples with a persistent value problem, leaving investors dissatisfied. Relative to market indices, the pharmaceutical sector continues to underperform in capital markets. The reason for this could be that in 2023, the healthcare field in the US encountered challenging circumstances, marked by persistently high inflation rates, shortages in labor, and the ongoing prevalence of COVID-19. The S&P 500 Pharmaceuticals Select Industry Index, which monitors the performance of pharmaceutical companies, showed a total return of 2.77% for the year, in contrast to the 25.4% return of the broader market. That said, it's worth noting that the pharmaceutical branch did not experience as much decline as other sectors like consumer staples and utilities.
One significant factor contributing to the stability of the pharmaceutical area is the active pursuit by pharmaceutical companies to acquire innovative biotech firms through a series of smaller acquisitions, rather than pursuing large-scale mergers. This strategy helps them address potential gaps in their product pipelines more effectively. In a recent development, Novartis AG (NYSE:NVS) has reached an agreement to acquire MorphoSys AG (NASDAQ:MOR), a move aimed at obtaining an experimental medicine for blood cancer that complements Novartis's existing portfolio. This acquisition is among six deals valued at over $1 billion that have been announced just this year, as reported by Bloomberg.
The healthcare sector's lackluster performance in 2023 hasn't dampened the enthusiasm of analysts. Healthcare investors and analysts are unexpectedly optimistic about the outlook. Although few anticipate rapid or explosive growth, and certain segments are more favorable than others, there's a prevailing sentiment that the healthcare sector as a whole is poised for a resurgence. Ziad Bakri, a portfolio manager at T. Rowe Price, discussed the outlook for the sector with Barron's this year. Here are some comments from the analyst:
“Everyone worries about these stocks in election years, and I feel like we’ve [already] taken a lot of pain. Most of the sub-sectors are pretty well set up for next year.”
Mr. Bakri also addressed the impact of GLP-1 weight loss medications, which triggered sell-offs in the medical devices sector. The rationale behind this was the belief that these medications would reduce the necessity for various medical procedures and devices. According to Bakri, many of these stocks have only partially recovered from their losses related to GLP-1. He anticipates that concerns regarding GLP-1 will continue to affect the stocks, but he also mentioned that there may be a growing understanding in the market that the effects will be more prolonged, particularly if interest rates decrease.
Pfizer Inc. (NYSE:PFE), Gilead Sciences, Inc. (NASDAQ:GILD), and Merck & Co., Inc. (NYSE:MRK) are some of the best pharma stocks because of their consistent performance and their ability to pay regular dividends to shareholders. In this article, we will further take a look at some of the best dividend stocks from the pharma sector.
13 Best Pharma Dividend Stocks To Buy in 2024
A well-stocked pharmacy shelf full of the company's pharmaceuticals, nutraceuticals, over-the-counter medications, and health care products.
Our Methodology:
For this list, we scanned the holding of VanEck Pharmaceutical ETF, which aims to mirror the price and yield movements of the MVIS US Listed Pharmaceutical 25 Index (MVPPHTR). This index is designed to monitor the overall performance of companies engaged in pharmaceutical activities, encompassing pharmaceutical research and development, as well as the production, marketing, and sales of pharmaceutical products. From the index, we picked 13 stocks that pay dividends and have garnered the most attention from hedge fund investors by the conclusion of Q4 2023, using data from Insider Monkey’s database. The stocks are ranked in ascending order of the number of hedge funds having stakes in them. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Organon & Co. (NYSE:OGN) is an American pharmaceutical company that focuses on improving the health of women throughout their lives. They specialize in developing and delivering innovative solutions in women's health, including contraception, fertility, menopause management, and other related areas. On February 15, the company declared a quarterly dividend of $0.28 per share, which was in line with its previous dividend. It is one of the best dividend stocks on our list as the company has been maintaining regular dividends since 2021. The stock's dividend yield on March 4 came in at 6.37%.
At the end of Q4 2023, 30 hedge funds in Insider Monkey's database reported owning stakes in Organon & Co. (NYSE:OGN), compared to 33 in the previous quarter. The total value of these stakes is over $303.6 million.
Sanofi (NASDAQ:SNY) is a multinational pharmaceutical company that engages in the research, development, manufacturing, and marketing of pharmaceutical products. On February 1, the company declared a 5.6% hike in its annual dividend to €3.76 per share. Through this increase, the company stretched its dividend growth streak to 29 years, which makes SNY one of the best dividend stocks in the pharma sector. As of March 4, the stock has a dividend yield of 4.01%.
The number of hedge funds tracked by Insider Monkey owning stakes in Sanofi (NASDAQ:SNY) grew to 32 in Q4 2023, from 29 in the previous quarter. The collective worth of these stakes is over $1.1 billion. With more than 14.3 billion shares, Fisher Asset Management was the company's leading stakeholder in Q4.
GSK plc (NYSE:GSK) is a leading global healthcare company. It operates across various therapeutic areas including respiratory, HIV/AIDS, oncology, immuno-inflammation, and vaccines. The company currently offers a quarterly dividend of $0.406 per share and has a dividend yield of 3.48%, as of March 4. During FY23, it returned £2.2 billion to shareholders through dividends, which makes GSK one of the best dividend stocks in the pharma sector.
As of the close of Q4 2023, 40 hedge funds in Insider Monkey's database reported having stakes in GSK plc (NYSE:GSK), down from 42 in the preceding quarter. The consolidated value of these stakes is roughly $1.8 billion.
Viatris Inc. (NASDAQ:VTRS) is a global pharmaceutical company formed through the merger of Mylan N.V. and Upjohn, a division of Pfizer Inc. Viatris focuses on providing affordable access to high-quality medicines, including generic drugs, complex generics, biosimilars, and over-the-counter products. The company initiated its dividend policy in 2021 and currently pays a quarterly dividend of $0.12 per share. With a dividend yield of 3.87% as of March 4, VTRS is one of the best dividend stocks on our list.
According to Insider Monkey's database of Q4 2023, 43 hedge funds owned stakes in Viatris Inc. (NASDAQ:VTRS), which remained unchanged from the previous quarter. These stakes are collectively valued at over $1.2 billion. Among these hedge funds, Deerfield Management was the company's leading stakeholder in Q4.
Cencora, Inc. (NYSE:COR) previously identified as AmerisourceBergen, operates as a drug wholesale business and a contract research organization based in the US. The company was a part of 48 hedge fund portfolios at the end of Q4 2023, up from 43 in the previous quarter, as per Insider Monkey's database. The stakes owned by these hedge funds have a collective value of over $1.17 billion.
Cencora, Inc. (NYSE:COR), one of the best dividend stocks, has been growing its dividends for the past 19 consecutive years. The company's current quarterly dividend comes in at $0.51 per share for a dividend yield of 0.86%, as recorded on March 4.
Zoetis Inc. (NYSE:ZTS) is an American drug company that develops, manufactures, and markets a wide range of veterinary medicines and vaccines for livestock and companion animals. On February 6, the company announced a quarterly dividend of $0.432 per share, which fell in line with its previous dividend. This was the company's 12th consecutive year of dividend growth, which places ZTS on our list of the best pharma dividend stocks to buy in 2024. The stock has a dividend yield of 0.92%, as of March 4.
Insider Monkey's database of Q4 2023 indicated that 50 hedge funds owned stakes in Zoetis Inc. (NYSE:ZTS), compared with 56 in the previous quarter. The total value of these stakes is more than $1.34 billion. Cantillon Capital Management was the largest stakeholder of the company in Q4 2023.
Bristol-Myers Squibb Company (NYSE:BMY) is a global biopharmaceutical company that focuses on discovering, developing, and delivering innovative medicines to patients with serious diseases, particularly in the areas of oncology, cardiovascular, immunoscience, and fibrosis. The company pays a quarterly dividend of $0.60 per share, having raised it by 5.3% in December 2023. Through this increase, it achieved its 18th annual consecutive dividend growth, which makes BMY one of the best dividend stocks in the pharma sector. As of March 4, the stock offers a dividend yield of 4.65%.
At the end of December 2023, 60 hedge funds in Insider Monkey's database owned stakes in Bristol-Myers Squibb Company (NYSE:BMY), down slightly from 65 in the previous quarter. These stakes have a total value of over $2 billion.
McKesson Corporation (NYSE:MCK) ranks sixth on our list of the best dividend stocks from the pharma sector. The global healthcare and pharmaceutical company has been growing its dividends for the past seven years and offers a quarterly dividend of $0.62 per share. The stock's dividend yield on March 4 came in at 0.47%.
The number of hedge funds tracked by Insider Monkey holding stakes in McKesson Corporation (NYSE:MCK) jumped to 69 in Q4 2023, from 58 in the previous quarter. These stakes are collectively valued at over $4.2 billion.
