If there’s one thing income investors love more than regular dividend payments, it’s regular And growing dividend payouts. Of course, not every company can offer that. Some will eventually suspend their dividend programs or at least reduce their payouts.
Fortunately, there are stocks in the market that seem to be committed to returning capital to their shareholders through consistent dividend increases. That’s what income seekers are after. Let’s take a look at an excellent dividend growth stock that’s worth sticking with for the next decade: Amgen (NASDAQ: AMGN).
Amgen dividend record
Amgen is one of the world’s largest biotech companies. The company has a wide range of medicines, nine of which generated at least $1 billion in sales last year. Selling life-saving medicines is not a business that will go out of style anytime soon. Amgen’s success in this area is the main driver of its long-term performance and regular dividend increases. It is true that past history is no guarantee of future success.
But it’s still worth highlighting that Amgen has an excellent dividend track record — something that points to an underlying culture within the company that could lend itself to future success. Over the past decade, Amgen has increased its dividends by a whopping 269%. The drugmaker’s forward yield of 2.83% is well above the S&P 500‘s average of 1.35%. Amgen’s cash dividend payout is approximately 65%. That seems a bit high, but not prohibitively so. The last dividend increase was recent: in the first quarter.
So Amgen has clearly demonstrated its commitment to increasing its payouts, but can the company’s financial performance support its dividend program going forward?
Why the future is bright
The path forward is clear for Amgen. The company needs to develop newer, innovative drugs that can drive sales and profit growth.
One area that biotechnology has been working on is weight loss therapies, perhaps the most high-profile field in the industry right now. Drug makers are investing millions in the development of anti-obesity drugs. Why? Thanks to major and relatively recent breakthroughs, sales of weight-loss drugs are expected to skyrocket by the end of this decade.
Although Amgen currently lags behind the leaders in the field, it is making steady progress. The biotech’s Phase 2 asset, MariTide, looks relatively promising. Recent Phase 1 data showed that MariTide helped reduce body weight in patients and kept it off for up to 150 days after the end of treatment — a significant benefit.
It’s way too early to crown MariTide as the next big thing in weight loss treatment, especially considering the cutthroat competition. However, Amgen does exactly what is expected of it. The company has other weight loss drugs in development. It also has a deep pipeline outside this area, with several dozen candidates in total.
Quantity is important in the biotech industry. Many programs in Phase 1 trials never make it to market, so it is almost essential to diversify. Most of the largest and most successful drugmakers have deep pipelines. This also applies to Amgen. Furthermore, the company can also rely on acquisitions to boost its prospects. Last year it completed the acquisition of Horizon Therapeutics for about $28 billion.
Through the deal, Amgen acquired Tepezza, the first drug approved by the U.S. Food and Drug Administration for the treatment of thyroid eye disease (TED). Tepezza has not performed as well as Horizon Therapeutics had hoped. However, Amgen’s greater marketing expertise than Horizon’s, and the former’s larger cash balance, should allow it to make meaningful progress in this area. And that’s not to mention the pipeline candidates Amgen has also acquired through this transaction.
Amgen should be able to grow its sales and profits significantly as it expands its range of approved drugs. The company’s underlying business remains solid, and long-term investors have good reasons to consider shares of this top dividend growth stock.
Should You Invest $1,000 in Amgen Now?
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.
1 Dividend Growth Stock to Buy and Hold for 10 Years was originally published by The Motley Fool
