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A new breed of dividend stocks offers investors the best of both worlds: growing dividend payments and impressive share price performance. I’m talking about biotech dividend stocks . . . an asset that every investor should own.
You may be scratching your head in amazement. Biotech stocks? Really? At first glance, biotechs may appear to be extremely risky. The future of these companies lies in expensive research and development, clinical trials, and a lengthy FDA approval process.
Most income investors do their best to avoid risks. They prefer to buy established companies that serve an insatiable need: oil with Exxon Mobil (NYSE: XOM), fast food with McDonald’s (NYSE: MCD) or cigarettes with Altria (NYSE: MO).
Risky biotech stocks may catch the attention of thrill seeking investors. But it’s worth pointing out that there are two established biotech stocks that income investors should consider for their portfolio.
The companies are Amgen (NASDAQ: AMGN) and AbbVie (NYSE: ABBV). Both companies have been rewarding shareholders with healthy and growing dividends. And their share prices have also been rising at a healthy pace.
Amgen: The Best-Performing Biotech…Ever
Amgen is one of the most established biotech stocks. Measured by market capitalization, it’s the second largest after Gilead Sciences (NASDAQ: GILD). Founded in 1980, Amgen has expanded through its own drug development and an aggressive acquisition strategy.
Amgen stock has been one of the best-performing stocks in the history of the stock market. Since going public in 1984, the stock has risen 145,477%. That’s no typo. A $1,000 investment in the Amgen IPO would be worth more than $1.5 million today.
In 2011, Amgen initiated its first dividend. The 2% dividend yield wasn’t huge. But it was a sign of good things to come. Since then, the quarterly dividend has increased nearly 200% times to $0.79 per share.
Since that first $0.28 quarterly dividend payment, Amgen shares have soared 182%. Amgen’s dividend currently delivers a 2.1% dividend yield.
AbbVie: A Dividend-Paying Spinoff
Founded in 1888, Abbot Laboratories (NYSE: ABT) is one of the oldest biotech companies still operating today. Over the last 127 years, the company built a substantial portfolio of drugs and medical devices.
In 2013, Abbot Labs split into two businesses. Abbott Labs retained its medical device business. The company’s pharmaceutical and drug pipeline business was spun off in a new company called AbbVie (NYSE: ABBV).
Abbot Labs has a long history of paying solid dividends. Between 2000 and 2013, the company increased its dividend by 168%. During the same time, the stock outperformed the S&P 500 by a ratio of 2-to-1.
AbbVie is still a relatively new public company. But this company with a $91 billion market cap has already been paying its shareholders dividends. Since listing shares on the NYSE in January 2013, AbbVie has increases its dividend by 23%. The stock has also been a solid performer, rising 65%.
Today, AbbVie shares pay a 3.2% dividend yield. With the company’s earnings expected to jump by one-third this year, you can expect those dividend payments will keep growing too.
Biotech Dividends Growing
The aging American population provides a strong tailwind for the biotech and pharmaceutical industry. Established biotech stocks including Amgen and AbbVie have a history of rewarding shareholders with growing dividend payments. I expect dividend growth will continue, and these stocks should outperform the market. Income investors should feel good buying and holding these stocks for the long term.
Of course, biotech also offers huge opportunities to get in on the ground floor. One unlikely company is in the early stages of developing a “Smart Pill.” This innovation could turn the whole biotech sector upside down. Investors who get in on the ground floor could stand to reap amazing returns.
In good news, the company behind the Smart Pill isn’t some biotech startup. In fact, the company has billions in the bank and numerous amazing innovations in its pipeline. To learn about this little-known opportunity, click here now.