-
The pharmaceutical industry is currently under the microscope from investors, particularly due to shifting dynamics between Washington and consumers.
-
Despite being a common challenge, pharmaceutical companies are grappling with patent cliffs.
-
There’s one company in particular that has a strong history of maintaining dividends even during tough times:
-
10 stocks I like more than Merck›
Political shifts are having significant effects on the healthcare sector, and drug makers seem to be bearing the brunt of these changes. Major companies like Pfizer, Merck, and Bristol Myers Squibb have experienced stock drops alongside rising yields.
For those interested in investing, the pharmaceutical space is becoming increasingly appealing for potential buyers. If you’re considering putting down $1,000, there’s one stock that stands out.
Looking at the bigger picture, companies like Pfizer, Merck, and Bristol Myers Squibb essentially follow a similar process: they research, develop, gain approval, and then sell drugs to consumers. Yes, that’s a massive simplification of a lengthy and costly process.
Finding new drugs is challenging. The ability to develop them is crucial because pharmaceutical firms enjoy a limited exclusive period to market newly created drugs. However, once these patents expire, generic alternatives flood the market, significantly cutting into profits—this is often referred to as a patent cliff, and it’s something the industry commonly faces.
As for the government, while it’s a constant factor, current sentiments in D.C. are particularly negative towards the drug sector. Vaccine manufacturers are especially affected. This challenging environment isn’t exactly new, but it does add extra pressure that most pharmaceutical companies navigate regularly.
Having been in the industry for decades, companies like Pfizer, Merck, and Bristol Myers Squibb are well-equipped to handle patent challenges and regulatory hurdles. Yet, each of their stocks has dropped significantly from previous peaks—around 60% for Pfizer and about 40% for both Merck and Bristol Myers. This decrease has improved their dividend attractiveness.
As a result, dividend enthusiasts might find all three companies attractive. But, if you lean towards buying one of these stocks, which should you consider? Examining dividend history can be a wise starting point. Perhaps notably, Pfizer had to cut its dividend back in 2009.
However, for those who prioritize consistent dividends, both Merck and Bristol-Myers Squibb offer a more reliable track record. When considering yields, Bristol-Myers’ 5.3% looks appealing compared to Merck’s 4%. It seems fair to say both have their merits, but from a valuation standpoint, Merck might have a clearer edge.
Merck’s price-to-sale (P/S), price-to-earnings (P/E), and price-to-book (P/B) ratios all sit below the average—especially over five years. Meanwhile, Bristol Myers has a P/S ratio that’s also below its five-year average. Although they’ve had some recent revenue dips, Merck’s current P/E is lower than that of Bristol Myers, suggesting it could be a better value.
If delving into your favorite drug maker, Merck likely should be your initial focus.
In terms of high yields, Merck, Bristol Myers Squibb, and Pfizer could be viewed as varying degrees of risk and reward. Take Merck, for instance; it does face a significant patent cliff concerning its key drug, Keytruda, but there are mitigating factors. Expanded international patents could protect it until nearly 2040, although delays in the company’s HPV vaccine in major markets are also a concern.
So, in essence, investing in Merck isn’t as straightforward as with Pfizer or Bristol-Myers Squibb. When purchasing stocks, you have to consider whether Merck can navigate through the current challenges as adeptly as it has in the past. If you invest $1,000, you’ll likely acquire around 12 shares of this historically reliable dividend payer, which could provide a solid yield and favorable evaluation.
Just something to ponder before making a purchase with Merck.
The analysts at Stock Advisor have listed what they regard as the top stocks to buy right now… and Merck didn’t make the cut. Those top 10 stocks could potentially see significant gains over the next few years.
When should you think about it? It’s interesting to note that investments in some of the more popular stocks have seen remarkable returns. For example, a $1,000 investment in Netflix back in 2004 would be worth over $661,910 today!
As for Stock Advisor, it boasts impressive return rates, outperforming the market relative to the S&P 500. Keep an eye on their latest top 10 list to see what’s making waves in the market.
