We recently compiled a list of the 13 Best Pharma Dividend Stocks To Buy In 2024. In this article, we are going to take a look at where Humana Inc. (NYSE:HUM) stands against the other pharma dividend stocks.
The pharmaceutical industry in 2024 faced a relatively quiet year, with deal volumes similar to 2023 but lower deal values, reflecting a shift toward smaller, more strategic transactions. Despite challenges such as patent expirations and market uncertainty, innovation remains strong, and there is a better investment environment for biotech. Lower interest rates have also eased capital costs, contributing to increased mergers and acquisitions activity. Biotech IPOs and venture capital investments are seeing a slight recovery, though investment is more concentrated in established companies. However, major pharmaceutical companies face a $300 billion growth gap due to patent expirations, making dealmaking crucial for future growth.
Looking ahead to 2025, EY believes that the pharmaceutical sector is expected to see more deal activity, especially if interest rates remain low. There may be a rise in larger acquisitions to address growth gaps, although smaller, strategic deals are likely to persist. Politically, the US policy environment is shifting with potential impacts on business, including lower corporate taxes and deregulation, but also the possibility of higher tariffs and continued drug pricing reforms. Changes in immigration and leadership within health agencies could also affect the pharmaceutical and biotech industries, with new appointees potentially disrupting the regulatory landscape.
As executives prepare for 2025, drug pricing and access remain their top concerns, according to a Deloitte survey. The survey highlighted that primary concerns include competition from generic drugs and biosimilars and the looming patent cliff, with over $300 billion in sales at risk due to expiring patents by 2030. This has executives expecting a surge in mergers and acquisitions in 2025.
Innovation remains at the forefront as companies look to fill gaps left by expiring patents. However, competition in profitable areas like oncology and immunology is fierce, leading to price pressures even before generics or biosimilars hit the market. On the flip side, the success of GLP-1 receptor agonists is sparking renewed interest in general medicines, with companies racing to tap into the $200 billion market. Additionally, about 20% of companies are adjusting their portfolios to focus on high-potential candidates and better meet market demands. Advanced therapies like cell and gene therapies are also gaining attention, with a shift away from more traditional drugs.
In addition to the competitive landscape, life sciences companies are also keeping a close eye on regulatory changes. In the United States, concerns about the Inflation Reduction Act are growing, while in Europe, shifts in clinical trial regulations could add complexity. As a result, life sciences companies are preparing for a year of both innovation-driven growth and regulatory challenges.
Our Methodology
In this article, we reviewed Insider Monkey’s Q3 2024 database to identify pharmaceutical dividend stocks that hedge funds favored the most. The companies listed below are ranked in ascending order based on the number of hedge fund holders in each firm.
At Insider Monkey, we are obsessed with 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 closeup of an elderly patient happily receiving a specialty healthcare product.
Humana Inc. (NYSE:HUM)
Dividend Yield as of December 28: 1.43%
Number of Hedge Fund Holders: 60
Humana Inc. (NYSE:HUM) provides medical and specialty insurance products. It offers medical and supplemental benefit plans, including Medicare, Medicaid, and long-term support services, along with dental, vision, life insurance, and pharmacy benefit management. The company also delivers military services, operates pharmacies and senior-focused care centers, and provides home health and hospice services.
Cigna and Humana Inc. (NYSE:HUM) explored a merger last year but paused due to pricing disagreements and investor concerns. Talks reportedly restarted this fall, aiming to create a healthcare giant with $300 billion in annual revenue, potentially rivaling UnitedHealth and CVS. However, Cigna’s CEO, David Cordani, recently dismissed the merger speculation, emphasizing the company’s focus on share buybacks over acquisitions.
In its Q3 2024 earnings call, Humana Inc. (NYSE:HUM) highlighted four key drivers of success – delivering well-priced Medicare products, ensuring clinical excellence for strong margins, maintaining operational efficiency, and strategically investing in growth for CenterWell and Medicaid. Quarterly results exceeded expectations, with projected annual growth of 5%, driven by disciplined pricing and increased marketing efforts. Operational efficiency is improving through technology, including AI tools that reduce administrative tasks while maintaining quality care. Strategic investments in senior-focused primary care clinics are driving growth, with plans to add 40 new locations this year. Despite industry challenges, Humana Inc. (NYSE:HUM) remains focused on balancing short-term earnings with long-term value creation.
On October 24, Humana Inc. (NYSE:HUM) announced its quarterly dividend of $0.885 per share. The dividend is payable on January 31, 2025, to shareholders on record as of December 31.
Boykin Curry’s Eagle Capital Management is the leading stakeholder of Humana Inc. (NYSE:HUM), with 3.2 million shares worth $1 billion. Overall, 60 hedge funds were bullish on the stock at the end of Q3 2024.
Overall HUM ranks 12th on our list of the best pharma dividend stocks to buy in 2024. While we acknowledge the potential of HUM as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HUM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
