Why I think AstraZeneca is a must-buy dividend stock

A steadily climbing share price, varied product development and positive trial results point to continued success for this big pharma leader AstraZeneca plc (LON:AZN).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

AstraZeneca (LSE: AZN) continues to be a must-buy, in my opinion, for a long-term dividend-based portfolio. The British-Swedish multinational has gone from strength to strength in recent years, with a steadily climbing share price to back it. In a highly competitive and risky market, I feel the company’s impressive oncology portfolio has much potential for future gains.

In comparison to the rest of the UK pharmaceutical market, it may appear to be priced over the industry average, but it is a company to be admired for its innovative developments and varied areas of expertise.

Vast and varied portfolio

AstraZeneca has a portfolio of products for major disease areas including cancer, cardiovascular, gastrointestinal, infection, neuroscience, respiratory and inflammation.

Lynparza, a drug which Merck shares rights to, recently gained approval to treat Metastatic Breast Cancer and BRCA-mutated breast and ovarian cancer.

Farxiga, a medication used to treat type 2 diabetes, developed by Bristol-Myers Squibb, in partnership with AstraZeneca, has gained approval in the European Union to help treat type-1 diabetes. This is the first AstraZeneca medicine ever approved for type-1 diabetes and is used in oral form to aid insulin treatment in patients whose glucose levels are not adequately controlled with insulin alone.

Although the AstraZeneca dividend may seem mediocre at 3.65%, it remains consistent and reliable. This is a respected and innovative company continuing to produce superior products in a high-risk, high-reward sector.

Failure breeds success

AstraZeneca fell 11 places in this year’s Pharmaceutical Innovation Index 2019, most likely because it was hard hit by phase III trial failures in immuno-oncology (a unique approach that uses the body’s immune system to help fight cancer), COPD, Lupus and Alzheimer’s. Unfortunately, failure is an inevitable and vital part of research and development, which I deem necessary for successes to be realised.

Generic variants of profitable drugs are an ever-present problem for pharmaceutical companies. AstraZeneca’s Faslodex has been replicated and launched in generic form by competitor Novartis. This drug is used in treating hormone receptor-positive metastatic breast cancer and represented 5% of AstraZeneca’s total sales in 2018. Although the launch of the generic is recent, its likelihood has been in the pipeline for years. Back in 2016 a court settlement put off generic competition until March 2019, so a launch was inevitable. In my opinion, the profit-eating pressures caused by generics has already been factored into the share price.

On the upside, sales of new medicines this year is up an impressive 83% from the same period in 2018. Chief Exec Pascal Soriot has focused on creating an admirable R&D culture, which is getting products through development to pharmacy shelves.

Slow and steady wins the race

AstraZeneca is focused on lasting growth and maintaining its leading position in the global immuno-oncology market. It is a world leader, with positive earnings growth forecast for the next two years, according to City analysts. For these reasons I see its share price continuing to move onwards and upwards.

Factors continuing to affect the long-term success of big pharma companies such as AstraZeneca include international drug pricing, the growth of pharmaceutical products from China and the ever-present Brexit.

All companies in this sector face ups and downs, but I believe the overall ups and reliable dividend pay-out make AstraZeneca a company worth long-term investment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »