Whether your retirement is on the near horizon or still a long way off, it's important to build a diversified portfolio of dividend-paying stocks that you can rely on for healthy yields and ongoing returns. If you're thinking about investing in pharmaceutical stocks to bankroll your retirement, it's wise to choose companies with a long and dependable history of growth and a varied portfolio of products.
As more pharmaceutical companies jump into the race to develop a coronavirus vaccine, possible winners and losers have already begun to emerge. These two pharma giants are good long-term buys for your retirement investment strategy with or without a coronavirus vaccine on the market.
Johnson & Johnson
Shares of Johnson & Johnson (NYSE: JNJ) took a nosedive in March with the rest of the market, but have rebounded back near where they were at the beginning of January. Johnson & Johnson reported more than $82 billion in sales in 2019, representing 2.8% earnings growth on an operational basis.
As other companies struggled to stay above water, the pandemic had surprisingly little impact on the company's top and bottom lines in the first quarter of 2020. In fact, Johnson & Johnson reported a 3.3% rise in earnings year-over-year, with $20.7 billion in total revenue. Earnings per share rose by 56.1% in the first quarter of the year, and adjusted EPS went up by nearly 10%. When Johnson & Johnson reported its second-quarter 2020 results on July 16, the company boosted its full-year guidance despite a 10.8% drop in sales. Pharmaceutical sales drove Johnson & Johnson's second-quarter earnings, which were $18 billion, with global revenue in the segment up nearly 4% compared to Q2 2019.
One of Johnson & Johnson's subsidiaries, Janssen Pharmaceutica, is developing a COVID-19 vaccine candidate known as Ad26.COV2-S. Johnson & Johnson inked a five-year manufacturing deal with Emergent Biosolutions (NYSE: EBS) for its potential coronavirus vaccine in early July. Assuming the vaccine passes clinical trials, Emergent will begin manufacturing next year. Janssen Pharmaceuticals is working in partnership with the Biomedical Advanced Research and Development Authority (BARDA) and previously received $456 billion in Operation Warp Speed funding from the Department of Health and Human Services for the COVID-19 vaccine candidate.
On July 30, Johnson & Johnson announced that in a pre-clinical study on non-human primates, the potential vaccine produced a positive immune reaction against SARS-CoV-2, which causes the novel coronavirus known as COVID-19. A phase 1/2a human trial of Ad26.COV2-S on more than 1,000 participants is currently under way in the U.S. and Belgium, and the company hopes to initiate a phase 3 study in September. Also in the works are a phase 1 study to be held in Japan, and a phase 2a trial in Germany, Spain, and the Netherlands. Pending the vaccine's success in human trials and regulatory approval, Johnson & Johnson is targeting the distribution of 1 billion doses worldwide in 2021.
Besides its wider implications for the global consumer market, a successful vaccine would most certainly increase Johnson & Johnson's valuation and boost the portfolios of existing shareholders. Although Johnson & Johnson's yield of 2.75% isn't the largest of the Dividend Aristocrats, its impressive portfolio of products -- and its overall resilience in what the International Monetary Fund has called the "worst economic downturn since the Great Depression" are a few key reasons this stock is a tempting buy to help bankroll your retirement fund.
Pfizer (NYSE: PFE) is another blue-chip stock that has been hitting the news cycles lately. The company just advanced the lead candidate, BNT162b2, from its COVID-19 vaccine program with German-based BioNTech (NASDAQ: BNTX) to a phase 2/3 human trial. The investigational mRNA-based vaccine is being tested on 30,000 subjects between the ages of 18 and 85. The phase 2/3 study is already under way in the U.S. and will include participants in about 120 locations across the world. Pfizer and BioNTech are hoping to seek regulatory approval as soon as October. Pending clinical success and the regulatory green light, the companies intend to produce as many as 100 million doses before the close of the year and 1.3 billion doses in 2021. Pfizer and BioNTech have already reached vaccine agreements with the U.S. and U.K. governments if their COVID-19 vaccine is approved. Under the terms of the respective agreements, the companies would provide 30 million doses of the vaccine in the U.K. by the end of 2021, and up to 600 million doses in the U.S.
Pfizer has plenty to offer investors outside its possible coronavirus vaccine success. The company has consistently beat analyst estimates over the past two quarters, despite a moderate decline in overall revenue. Pfizer reported nearly $52 billion in revenue last year. In the first three months of 2020, during the early days of the pandemic, the company brought in earnings totaling $12 billion. Factoring out Pfizer's consumer healthcare division, which the company merged with GlaxoSmithKline's (NYSE: GSK) last year, the company only experienced a 1% drop in revenue in Q1.
Pfizer's Q2 earnings report just came out on July 28, promptly sending shares up by 4.5%. In the second quarter, Pfizer reported revenue of $11.8 billion, down 3% operationally. The company's biopharma division grew 6% on an operational basis due to blockbuster drugs like anticoagulant Eliquis, with sales of that stalwart up 19% worldwide. Pfizer noted in its Q2 report that the pandemic hasn't had much effect on its supply chain. The company initiated several vaccine candidate programs in the second quarter apart from its coronavirus vaccine study, including one for the respiratory syncytial virus, which tends to cause symptoms similar to those of a cold. Pfizer notably raised its financial guidance for the full year, and management now expects 2020 revenue to hit in the range of $48.6 billion and $50.6 billion.
Having been in business for more 170 years, Pfizer has survived some of greatest global crises in history. Its nearly 4% dividend yield is a strong buying point, as is its solid base of products that have helped it to stave off extreme pandemic volatility. Shares of Pfizer have risen more than 158% in the past 10 years. While growth may be slow as the wider market moves toward consistent recovery, Pfizer should remain a worthy contender for your retirement portfolio.
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Emergent BioSolutions. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.