Amgen (AMGN) has trended downward since the end of 2022 because of rising competition and the difficulties with the Horizon Therapeutics acquisition. The United States Federal Trade Commission (FTC) has filed suit to block the $28 billion acquisition. Six states have also joined the lawsuit on antitrust grounds. However, the two firms compete in different areas, and the FTC lawsuit is based on pricing and bundling. My guess is the deal will eventually go through, but later than expected. Hence, Amgen may be attractive now for dividend growth investors.
Amgen is a biotech company focusing on six therapeutic areas: cardiovascular disease, oncology, bone health, neuroscience, nephrology, and inflammation. Several drugs in its portfolio include Enebrel, Neulasta, Otezla, Prolia, Repatha, etc. Investors should look at the Amgen investor relations site for more information.
Total revenue was $24,801 million in 2022 and $24,916 million in the last twelve months.
According to Stock Rover*, the stock price is up (-12.0%) year-to-date and (-2.3%) in the trailing year after adjusting for dividends return. For perspective, the S&P 500 Index has been up +17.5% in the past twelve months.
The falling stock price has pushed Amgen's dividend yield higher to 3.75%, above the 5-year average of 2.99%. Also, the yield is near a decade high. Amgen is on the list of Dividend Contenders with 12 years of increases. The 5-year growth rate is a bit over 11% CAGR. Dividend safety is solid, with a ~44% payout ratio. However, the leverage ratio has grown because of acquisitions, but the firm has $31+ billion of cash on hand and an A-/Baa1 investment grade credit rating. Moreover, the dividend quality grade is a ‘B+.’
Source: Portfolio Insight*
Amgen's M&A challenges and competition have also pushed the valuation down. It trades at a forward P/E ratio of ~12.5X. The stock is undervalued based on its historical 5-year P/E range. Investors may want to buy this stock now.
Source: Portfolio Insight*
Disclosure: Long AMGN
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.