With the Consumer Price Index (CPI) jumping 8.2% year-over-year for September, the Fed is expected to maintain its hawkish stance in its November meeting. As investors considered the rising odds of a recession, the S&P 500 and the Nasdaq composite marked their fourth weekly loss in five on Friday.
On the bright side, ongoing global vaccination rollout and pent-up demand for essential and non-essential medical treatments are driving the U.S. pharmaceuticals output and sales to remain robust. Moreover, the aging population will spur drug demand in the mid-and long-term. According to the WHO, one in every six people on the planet will be 60 or older by 2030.
On top of it, prescription drug prices in the United States are among the highest in the world, and recent years have been profitable for the American pharmaceutical industry.
As healthcare companies are considered safe havens amid market uncertainties, well-established stocks Johnson & Johnson (JNJ) and Pfizer Inc. (PFE) might be safe additions to your portfolio. Moreover, these companies have a history of consistent dividend payouts.
Johnson & Johnson (JNJ)
JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company operates through the broad segments of Consumer Health; Pharmaceuticals; and MedTech.
On September 20, JNJ announced the opening of the San Francisco Bay Campus, a cutting-edge Research and Development (R&D) center in the Bay Area. This should help JNJ further expand its presence in the Bay Area innovation ecosystem to strengthen and increase collaborations with innovators to accelerate growth.
On September 15, JNJ announced that its Board of Directors had authorized the repurchase of up to $5 billion of its common stock. The company does not expect to incur debt to fund the share repurchase program and aims to deliver shareholder returns and drive long-term growth.
On July 18, JNJ declared a quarterly dividend of $1.13 per common share, which was payable to shareholders on September 6. Its annual dividend of $4.52 yields 2.75% on prevailing prices.
The company’s dividend payouts have increased at a 5.8% CAGR over the past three years and a 6% CAGR over the past five years. The company has a record of 59 years of consecutive dividend growth.
JNJ’s gross profit increased 2.4% year-over-year to $16.10 billion in the second quarter that ended June 30. Its sale to customers grew 3% from the year-ago value to $24.02 billion, while its adjusted net earnings improved 4.3% year-over-year to $6.91 billion. The company’s adjusted net earnings per common share increased 4.4% from its year-ago value to $2.59.
The consensus EPS estimate of $10.04 for the fiscal year ending December 2022 indicates a 2.5% improvement year-over-year. The consensus revenue estimate of $95.25 billion is expected to increase by 1.6% year-over-year for the same year. Additionally, JNJ has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 2.8% over the past five days to close its last trading session at $164.46.
JNJ’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JNJ is rated an A in Stability and a B in Growth and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #2 out of 163 stocks.
In addition to the POWR Ratings grades just highlighted, you can see JNJ ratings for Value, Momentum, and Sentiment here.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, as well as disease control and prevention centers.
On October 5, PFE announced that it had completed the acquisition of Global Blood Therapeutics, Inc. (GBT), a biopharmaceutical company that deals with sickle cell disease (SCD). The acquisition reinforces Pfizer’s commitment to SCD, building on a 30-year legacy in the rare hematology space.
Moreover, on October 3, PFE announced the completion of its acquisition of Biohaven Pharmaceutical Holding Company Ltd., which makes NURTEC® ODT (rimegepant), an innovative migraine therapy approved for both acute treatment and prevention of episodic migraine in adults. This acquisition should bolster its capabilities and should be beneficial amid the rising migraine cases worldwide.
On September 22, PFE declared a quarterly dividend of $0.40 per share on its common stock, which was payable to shareholders on December 5. Its annual dividend of $1.60 yields 3.60% on current prices.
The company’s dividend payouts have increased at a 5.7% CAGR over the past three years and a 5.9% CAGR over the past five years. The company has a record of 11 years of consecutive dividend growth.
In the second quarter ended July 3, PFE’s revenue increased 46.8% year-over-year to $27.74 billion. Its income from continuing operations grew 69.6% from the year-ago value to $9.88 billion, while its adjusted income improved 93.5% year-over-year to $11.66 billion. The company’s adjusted earnings per common share increased 92.5% from its year-ago value to $2.04.
Analysts expect PFE’s EPS for the fourth fiscal quarter ending December 2022 to be $1.35, indicating a 25.1% improvement year-over-year. The company’s revenue is likely to increase 4.2% year-over-year to $24.84 billion in the same quarter. Additionally, PFE has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 3.3% over the past year to close its last trading session at $42.86.
It is no surprise that PFE has an overall A rating, which translates to Strong Buy in our proprietary rating system. PFE is also rated an A in Value and a B in Quality. It is ranked #11 in the same industry.
Click here to see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for PFE.
JNJ shares were trading at $166.59 per share on Monday afternoon, up $2.13 (+1.30%). Year-to-date, JNJ has declined -0.70%, versus a -21.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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