Pharmaceutical stocks make fantastic long-term investments because they can excel in any market environment. Regardless of the economic situation, patients need their medicines and will continue to buy them, resulting in a certain steadiness in revenue and growth for pharma companies.
What's a no-brainer pharma stock? It's one that you can hold onto for the long term due to its solid portfolio of products and strong pipeline. This sort of company would have proven its strength by delivering earnings growth over time, and innovation may extend this strength well into the future.
Pharma companies also are known for paying dividends, offering you a guaranteed stream of annual revenue. Below are three no-brainer pharma stocks to buy now if you have $500 to invest.
1. Abbott Laboratories
Abbott Laboratories (NYSE: ABT) makes pharmaceuticals, but the company also has three other winning businesses: medical devices, diagnostics, and nutrition. This diversification is Abbott's strength; if one business reaches a stumbling block, others can compensate. For example, today, a drop in coronavirus testing sales is weighing on the diagnostics business, but medical devices saw double-digit revenue growth in the recent quarter.
Abbott continues to grow, thanks to a steady flow of new product approvals, and has proven its ability to deliver returns to investors over time. The company is the most profitable healthcare stock ever for investors, according to a report by Hendrik Bessembinder at Arizona State University. Abbott stock delivered a cumulative compound return of 7,803,730% between 1937 and December of last year, the professor's report showed.
Investors in this healthcare company also benefit from its commitment to dividend growth. Abbott is a Dividend King, meaning it's raised the dividend payment annually for more than 50 consecutive years. This shows rewarding shareholders is a priority, suggesting the company will continue along this path.
On top of this, Abbott recently authorized a new repurchase program of up to $7 billion in stock -- another effort to reward shareholders and demonstrate confidence in the company's future.
2. Pfizer
Pfizer (NYSE: PFE) stock hasn't made much of a move this year and has slipped nearly 30% over the past three years. The stock is trading today at a dirt cheap valuation of 11x forward earnings estimates, so now is a good time to get in on the stock.
The company has traversed tough times, posting a steep drop in coronavirus vaccine and treatment sales, but a whole new batch of new products, current blockbusters, and a big investment in the oncology business should significantly add to growth in the coming years. Pfizer predicts that new products outside of the coronavirus business should contribute $20 billion to 2030 revenue.
The acquisition of oncology specialist Seagen already has started to bear fruit, too. "Seagen products are contributing meaningfully to our revenue," Chief Executive Officer Albert Bourla said in the latest earnings call. And the company is working toward a goal of launching at least eight blockbuster oncology medicines by 2030.
Though Pfizer isn't a Dividend King, the company pays a dividend of $1.68 per share at a high yield of 5.6% and has committed to growing its dividend over time.
3. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) spun out its consumer health business last year into a separate entity -- Kenvue -- to focus on the higher-growth businesses of pharmaceuticals and medtech, and this move is proving to be a winner. The company reported operational sales growth of 6.3% for its innovative-medicines branch and 6.4% growth for medtech in the most recent quarter.
This marked the second-straight quarter of innovative-medicine sales surpassing $14 billion -- and 11 of the company's major brands soared in the double digits. In other impressive news, immunotherapy Darzalex became the first product in J&J's portfolio to deliver $3 billion in sales in a single quarter. And recent approvals of Tremfya in ulcerative colitis and Rybrevant plus Lazcluze in non-small cell lung cancer should add to growth ahead.
As for medtech, recent acquisitions and divestitures positively impacted growth by nearly 3% in the quarter. Thanks to J&J's purchases of Shockwave and Abiomed, the company has become a leader in four of the biggest and fastest-growing cardiovascular-intervention markets.
J&J's solid financial situation -- with $19 billion in free cash flow -- should help it maintain its position as a Dividend King well into the future. It's a fantastic buy for passive income, as well as long-term earnings growth.
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of October 14, 2024
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories, Kenvue, and Pfizer. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.
3 No-Brainer Pharmaceutical Stocks to Buy With $500 Right Now was originally published by The Motley Fool