Stocks never follow a smooth, unhindered upward path. Sometimes even the strongest companies will encounter problems that cause their stock prices to drop. That’s no problem. The key to achieving great returns over five years or more is sticking with the old winners, even when they aren’t exactly winning. If you do, it will be worth it in the end.
Let’s take a look at two stocks that haven’t been able to keep up with the rising stock market in recent years: CFS health (NYSE: CVS) And Gilead Sciences (NASDAQ: GILD). Despite their problems, these two healthcare giants are excellent choices, especially for dividend investors.
1. CFS Health
CVS Health is not meeting expectations. Financial results have been disappointing over the past year and a half, partly due to lower revenues from COVID-19 vaccines. But even beyond that, CVS Health has revised its guidelines downward several times. Investors are often a bit shocked when a company does this. CVS Health, which has revised its own internal projections several times, is sending a bad signal.
High uncertainty is even more frightening to many investors than high risk, and that’s exactly the problem CVS Health is currently facing. However, the company has a lot to offer, especially for long-term investors. It has an extensive range of healthcare services, from primary care and insurance to what it is best known for as one of the largest pharmacy chains in the US. Focusing solely on CVS Health’s pharmacy business would be a mistake.
The company’s ecosystem ensures that it holds the hands of patients throughout their care journey. CVS Health is still looking for new opportunities. Although it sells drugs marketed by other companies, it recently created a subsidiary, Cordavis, to develop biosimilars. There’s a huge market here: Most Americans think prescription drugs are too expensive. Biosimilars offer much cheaper options.
And while this market is incredibly competitive, CVS Health has an advantage over most biosimilar makers. It already has an extensive network of potential patients within its ecosystem. CVS Health will have no shortage of growth opportunities within a vast and growing healthcare industry. The company has been solid in the past. Even with the problems it faces, CVS Health’s robust ecosystem and brand name should allow it to bounce back. The company’s dividend program also looks attractive.
Over the past 10 years, CVS Health has increased its dividends by 142%. The company currently offers a forward yield of 4.64%, well above S&P500‘s average of 1.35%. CVS Health’s dividend is likely safe for the next decade. It remains a solid choice for income investors despite recently lagging the market.
2. Gilead Sciences
Gilead Sciences has an extensive portfolio of drugs in oncology, virology and HIV, where it is arguably the leader. Although the biotech sector has faced some challenges in recent years, especially on the regulatory front, it has been able to maintain its revenues and earnings thanks to its antiviral drug against COVID-19, Veklury. Gilead Sciences is now moving beyond that. In the first quarter, it generated $6.1 billion in revenue, up 5% year-over-year (6% excluding Veklury).
That’s quite an achievement for a biotech giant. Gilead Sciences’ main growth driver, the HIV drug Veklury, posted sales of $2.9 billion, up 10% year over year. Biktarvy’s U.S. market share was approximately 49% in the quarter, up from 46% in the comparable period of the previous fiscal year. It recently received a label extension in pregnant adults.
Another HIV drug from Gilead Sciences – Sunlenca, a six-month, long-acting treatment – ​​is looking somewhat promising. Sunlenca first received regulatory approval in the US in December 2022. It is not yet contributing significantly to Gilead Sciences’ revenue, but is undergoing several clinical trials, including in the HIV PrEP market.
Gilead Sciences has also ramped up efforts in its oncology unit. It currently has nearly a dozen programs in Phase 3 studies in this area, and many more in earlier stages of development. Gilead Sciences has more than 50 programs, more than enough to expand its offerings in the coming years. Even a handful of approvals or label extensions per year will make a meaningful contribution to the company’s revenue.
Finally, Gilead Sciences’ dividend program looks attractive. The company’s forward yield is 4.58% and payouts have increased by 79% over the past ten years. Gilead Sciences should continue to increase its payouts through 2034 and beyond.
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Prosper Junior Bakiny has no position in any of the shares mentioned. The Motley Fool holds positions in and recommends Gilead Sciences. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.
2 Beat Dividend Stocks to Buy and Hold for 10 Years was originally published by The Motley Fool
