We recently compiled a list of the 10 Best Blue Chip Dividend Stocks To Buy. In this article, we are going to take a look at where Amgen Inc. (NASDAQ:AMGN) stands against the other blue chip dividend stocks.
When it comes to investing in stocks, investors often keep a close eye on the company’s financial health. Why? Because it directly impacts the potential returns on their investments. This is especially crucial for income investors, as solid financial health ensures regular dividend payments and steady dividend growth. In short, a company’s strong financial footing means it’s more likely to keep the cash flowing and the dividends climbing. Blue chip companies, especially those with over $100 billion in market cap, take the lead in this area. These firms are well-established, financially stable, and top players in their industries.
The Dow Jones Industrial Average is commonly regarded as an index of blue chip stocks. This widely watched stock market index includes 30 of the largest and most established publicly traded companies in the US. The index surged by over 4.7% since the start of 2024 and in the past 12 months, it gained 16.4%.
When comparing the performance of the broader market and the Dow Jones, both of which track large-cap U.S. companies, historical data reveals a high correlation between the two indices over time. However, there have been notable instances where their performances diverged significantly. According to a report from S&P Dow Jones Indices, the market substantially outperformed the Dow Jones over one- and three-year periods. Conversely, over the 30-year period leading up to 2019, the Dow Jones slightly outperformed the broader market. This indicates that although these indices often move together, short-term performance can vary, and specific market conditions and economic factors can influence which index performs better during different periods. The Dow Jones underperformed the broader market in 2023 by a wide margin.
While analysts frequently compare the performance of these two indices, it is important to note that the Dow represents only a small segment of the economy. In contrast, the broader market includes nearly 17 times as many companies. According to estimates from S&P Dow Jones Indices, more than $11.2 trillion investments were benchmarked to the broader market at the end of 2019. This is a staggering 350 times greater than the $32 billion benchmarked to the Dow. A key reason for the broader market’s outperformance compared to the Dow last year is that the market places more emphasis on the tech giants, which were the primary drivers of the wider market’s gains throughout the year.
Returning to the importance of blue chip companies, investors favor these firms because their strong financial health allows them to grow their dividends consistently. Dividend growth has remained a strong preference of investors over the years, prompting companies to increase their dividend payouts steadily. In this article, we will take a look at some of the best blue-chip dividend stocks.
Our Methodology:
For this list, we began by examining the current members of the Dow 30 that boasted a minimum market capitalization of $100 billion as of July 7. From this initial group, we specifically focused on companies that consistently pay dividends to their shareholders and have yields of at least 2%, as of July 7. These stocks were then ranked in ascending order of the number of hedge funds having stakes in them at the end of Q1 2024, as per Insider Monkey’s database. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A pharmacist filling a prescription for a complex drug developed by the company.
Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 63
Amgen Inc. (NASDAQ:AMGN) is an American biotech company that mainly deals in the manufacturing of innovative therapies. The company’s investors have much to look forward to with MariTide, a weight loss drug that has the potential to be a major competitor to products from Novo Nordisk and Eli Lilly. In its recent earnings release, the company announced that topline Phase 2 data for this drug is expected by late 2024. It also stated that it plans to conduct Phase 3 trials for MeriTide across multiple indications. If brought to market, this drug could significantly boost the company’s revenue by billions and serve as a major catalyst for both its overall sales and share price.
In recent years, Amgen Inc. (NASDAQ:AMGN) has been growing its business through acquisitions in an effort to boost its revenue and achieve much-needed growth. One of its acquisitions, Horizon Therapeutics, which was closed in October last year, generated $914 million in sales in the first quarter of 2024. Overall, the company reported revenue of over $7.4 billion, which showed a significant hike of 22% from the same period last year. In the past year, the stock is up by over 42%, outperforming the broader market, which returned 26.5% during this period.
Amgen Inc. (NASDAQ:AMGN) is one of the best dividend stocks on our list as the company has been rewarding shareholders with growing dividends for the past 11 years. The stock also has an impressive dividend yield of 2.90%, as recorded on July 7. However, the company’s trailing twelve-month payout ratio of 123.2% doesn’t sit well with dividend investors. This was also seen in the most recent quarter when it paid more in dividends than it generated. The company’s operating cash flow for the quarter came in at $0.7 billion and its free cash flow for the period stood at $0.5 billion. It returned $1.2 billion to shareholders through dividends. That said, biotech companies prioritize reinvesting their profits in research and development (R&D) over paying dividends. Therefore, the high payout ratio shouldn’t be a major concern for investors.
According to Insider Monkey’s database of Q1 2024, 63 hedge funds owned investments in Amgen Inc. (NASDAQ:AMGN), compared with 69 in the previous quarter. These stakes have a consolidated value of over $1.3 billion.
Overall AMGN ranks 6th on our list of the best blue chip dividend stocks to buy. You can visit 10 Best Blue Chip Dividend Stocks To Buy to see the other blue chip dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of AMGN as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than AMGN but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.
