3 Pharma Stocks You Should be Watching in 2022

Pharma stocks performed relatively poorly in 2021. The SPDR S&P Pharmaceuticals ETF (XPH) was down about (-10.5%), and the SPDR S&P Biotech ETF (XBI) was down about (-20.4%). 

The S&P 500 Index was up about 27%, and the NASDAQ was up roughly 21.4% in 2021. This deficit has made pharma stocks a value for investors. In addition, some pharma stocks are yielding over 3%, with conservative payout ratios adding to the attraction. 

Three pharma stocks for investors to consider for their portfolios are Merck (NYSE: MRK), Amgen (NASDAQ: AMGN), and Bristol-Myers Squibb (NYSE: BMY). All three stocks are dividend growth stocks with 10+ years of dividend growth.

Merck – A Cash Cow

Merck's R&D strengths and the recent acquisition of Acceleron are restocking the pipeline, especially in oncology. This fact portends well for Merck’s shareholders. 

Merck’s forward dividend yield of ~3.4% is supported by a solid free cash flow of approximately $8,158 million in the last 12-months. Earnings per share cover the dividend, and the payout ratio is conservative at about 47%. 

Amgen – High Dividend Growth

The company has a portfolio of solid therapies, including Neulasta (neutropenia), Enbrel (autoimmune diseases), Prolia (osteoporosis), Xgeva (fracture in cancer patients), Kyprolis (multiple myeloma), Repatha (cholesterol), and Aimovig (migraines).