If you are looking for a lucrative dividend yield, you may want to check out the large pharmaceutical stocks. AbbVie: (NYSE: ABBV) and Pfizer: (NYSE: PFE) stand out as two of the best in the industry.
So far this year, Pfizer has been the biggest winner in terms of stock performance. However, over the last decade, AbbVie has generated far more revenue than Pfizer.
Which of these two pharmaceutical giants is better off buying dividend stock now? Here’s how AbbVie և Pfizer stand against each other.
The case for AbbVie
Few pharmacists can match AbbVie’s record when it comes to dividends. The company belongs to an elite group known as Dividend Aristocrats, S&P 500: members of dividends with at least 25 consecutive years. AbbVie’s 4.6% dividend yield is one of the highest in the healthcare sector և it exceeds S&P 500:the current average is about 1.3%.
Can AbbVie continue its dividend drive? That’s a near certainty. The company generates more than enough free cash flow to finance its dividend program. His management also understands the importance of increasing dividends for shareholders.
However, there is one major downside to AbbVie. In 2023, the biological similarities of its best-selling drug, Humira, appeared on the US market. Humira, the immunosuppressive drug that has been the world’s best-selling drug for years, accounted for about 36% of the company’s total revenue in the second quarter.
However, AbbVie has long predicted the Humira twilight. The company already has two worthy successors in the market: Rinvoq (rheumatoid arthritis) and Skyrizi (plate psoriasis). The two drugs are expected to combine in 2025 to sell for $ 15 billion.
In addition, the AbbVie range includes several other sustainable growth engines. Blood Cancer Medications Imbruvica և Venclexta continue to gain momentum. The company’s acquisition of Allergan also led to several products with strong sales growth, including the anti-migraine drug Ubrelvy and the antiseptic Vraylar.
The case for Pfizer
Pfizer also offers an attractive dividend, which currently stands at almost 3.4%. The company is probably in a stronger position for future dividend growth than AbbVie. Pfizer generates significantly more cash flow than AbbVie. It also has cash (including cash, cash equivalents, short-term investments), which is 2.5 times larger than AbbVie.
You can bet that the cash position will improve. Pfizer plans to launch the COVID-19 vaccine BioNTech: will sell more than $ 22 billion in sales in the second half of this year.
The company expects its adjusted earnings to grow at least a low double-digit annual rate by the end of 2025. It should be noted that this assessment is adjusted for risk. Pfizer does not expect all of its pipeline candidates to be successful. The big drug maker also did not include any COVID-19 sales in its design.
There is no question that Pfizer will continue to make big money from its COVID-19 vaccine. No one still knows exactly how much recurring revenue a company can count on. Next year, Pfizer may have another major blockbuster on the market with its antiviral drug PF-07321332.
That said, both AbbVie and Pfizer have some challenges on the horizon. The company’s patents for several drugs expire in 2026, in the following years. Look for Pfizer, probably using some of its growing cash reserves to make gains that will help offset potential losses from future patent rock.
Better dividend stock
I like the fact that these two large shares of the pharmacy belong. However, I think AbbVie is a better stakeholder.
My reasoning is clear. AbbVie offers higher dividend returns. It has a better rate of dividend increase. Even with Humira’s biologically competitive competition on the road, the company should have no problem keeping the dividend flow.
I expect Pfizer to increase its sales and revenue growth over the next few years through its COVID-19 programs. However, AbbVie is likely to return quickly after a temporary drop in revenue when Humira loses its uniqueness. In my opinion, the future of AbbVie after 2025 seems stronger than Pfizer, at least for now.
This article presents the opinion of a writer who may disagree with the position of the “official” offer of Motley Fool Premium Consulting. We are motley! Investigating an investment thesis, even our own, helps all of us think critically about investing, making decisions that will help us become smarter, happier, and richer.