Any investor looking for the highest-paying dividend stocks would do well to start in Big Pharma, where many of the top picks offer yields in excess of 3% or 4%. Yet the highest-paying stocks aren’t always the best dividend stocks for your portfolio, particularly when an uncertain company foundation or unsustainable dividend yield is at play. The pharmaceutical industry is no exception, and several of the top dividend payers face uncertain futures.
How do you know which of the top dividend yields in big pharma are worth your investment? Let’s check out the five highest dividends in this industry to separate the strong stocks from the shaky ones.
No. 5: AbbVie Inc (NYSE:ABBV), 3.4% dividend yield
AbbVie Inc (NYSE:ABBV) opens up the top five dividend stocks in big pharma with its 3.4% dividend yield, an offering that few income investors would turn down. This is a tough company to grapple, however: Because AbbVie Inc (NYSE:ABBV)’s so young, we can’t find a dividend history to give a clear idea of this company’s commitment to raising its yield. AbbVie Inc (NYSE:ABBV)’s cash flow is no slouch, and the company’s payout ratio is just 10%, seemingly offering plenty of room to grow that 3.4% yield in the future. While the next few years should serve income investors well, this high-paying stock isn’t without questions.
Immunology drug Humira is the lifeblood of this firm, making up more than 50% of total sales last quarter after pulling in a whopping $9.3 billion in revenue last year. This titanic blockbuster is a stable, steady cash cow for AbbVie Inc (NYSE:ABBV)’s near future and makes this stock a nice pickup for income investors, but the game changes after 2016. That’s when Humira’s patent protection expires, and if a generic competitor emerges, the company’s financial foundation could take a huge blow. The company has promising candidates in its pipeline, but for income investors looking for a long-term safe pick to consistently deliver a nice dividend, AbbVie Inc (NYSE:ABBV) has just a few years left of Humria’s unchallenged dominance before a cloudy future arrives.
No. 4: Eli Lilly & Co. (NYSE:LLY), 3.5% dividend yield
Eli Lilly & Co. (NYSE:LLY)‘s 3.5% dividend ranks fourth in big pharma, and the company’s dividend history is appealing — until you reach 2009. For the first decade of the century, Eli Lilly & Co. (NYSE:LLY) raised its dividend every year, much to the delight of investors. Since 2009’s raise, however, the stock’s dividend has flatlined. Eli Lilly & Co. (NYSE:LLY)’s 47% payout ratio offers acceptable room for growth, but the company’s cash flow has been nothing pretty recently. Unfortunately, this company’s future isn’t looking like much for income investors to stake their bets on, either.