HH Better Big Pharma Dividend Stock: AbbVie Or Gilead?

Pharmaceutical companies are among the strongest dividend growth stocks in the market.

For example, AbbVie (ABBV) and Gilead Sciences (GILD) both currently sport above-average dividend yields.

When it comes to dividends, AbbVie has a head start over Gilead.

Going back to its days as a subsidiary of Abbott Laboratories (ABT), AbbVie is a Dividend Aristocrat, a group of companies in the S&P 500 that have raised dividends for 25+ years.

Both AbbVie and Gilead are highly profitable, with leadership positions in their respective therapeutic areas.

However, the rough patch Big Pharma currently finds itself in, is affecting Gilead far more than AbbVie right now.

This article will discuss the two companies, and why AbbVie is the better investment for dividend growth investors.

Business Overview

One of the big reasons why AbbVie is a better stock to buy than Gilead, is because their fundamentals are moving in opposite directions.

Both companies are facing pressure from expiring drug patents and deflation in drug pricing, but AbbVie continues to grow.

Despite a very difficult operating environment, AbbVie still generated 29% earnings growth in 2015, followed by 12% growth last year.

ABBV Growth

Source: 2017 JP Morgan Healthcare Conference, page 4

AbbVie’s business model is propelled by Humira, its most important individual product by far. Humira itself accounted for more than half of AbbVie’s revenue last year.

Humira treats a variety of conditions, including arthritis, plaque psoriasis, Crohn’s disease, and ulcerative colitis. Worldwide Humira product sales increased 16% in 2016, to $16.08 billion.

Meanwhile, Gilead is really struggling. Earnings-per-share declined 16% in 2016, due to a 7% decline in sales.

Gilead’s fourth-quarter sales fell 3% year over year, and have declined significantly over the past several years.

GILD Sales

Source: 2016 Tear Sheet, page 1

Gilead’s challenges pertain to its portfolio of HCV drugs, led by the flagship Hepatitis C treatments Harvoni and Sovaldi. Gilead’s HCV portfolio constitutes nearly 50% of Gilead’s annual sales.