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 UnitedHealth Group Incorporated (NYSE:UNH) 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 senior healthcare professional giving advice to a patient in a clinic.
UnitedHealth Group Incorporated (NYSE:UNH)
Dividend Yield as of December 28: 1.68%
Number of Hedge Fund Holders: 112
UnitedHealth Group Incorporated (NYSE:UNH) is a diversified healthcare company that provides health benefit plans and services to individuals, employers, and Medicaid recipients, along with care delivery, management, and wellness services. The company also offers software and consulting for healthcare organizations and provides pharmacy care services, including retail, home delivery, and drug management programs. UnitedHealth Group Incorporated (NYSE:UNH) ranks 1st on our list of the best dividend stocks in the pharma space.
UnitedHealth Group Incorporated (NYSE:UNH) has had a strong year, serving over 2 million new consumers with commercial offerings and filling more than 1.6 billion prescriptions through Optum Rx. The company also cares for 4.7 million people in value-based arrangements. The company remains optimistic about the future, even amid pressures in the healthcare sector. For instance, UnitedHealth’s launch of a national gold card program aims to reduce prior authorizations, improve care quality, and reduce friction.
In terms of financial performance, UnitedHealth Group Incorporated (NYSE:UNH) reported Q3 revenues of $101 billion, a 9% increase from the previous year, with strong growth in both Optum and UnitedHealthcare. OptumHealth saw revenues grow by $2 billion, driven by an increase in services for patients with complex needs, while OptumRx grew by $5 billion, fueled by a rise in pharmacy care offerings and new customers. UnitedHealthcare’s commercial business added 2.4 million new members, contributing to the company’s overall growth. The company has returned $9.6 billion to shareholders through dividends and share repurchases, while investing over $11 billion in strategic initiatives, including expanding partnerships like their collaboration with AARP to better serve older Americans.
According to Insider Monkey’s third quarter database, 112 hedge funds were long UnitedHealth Group Incorporated (NYSE:UNH), compared to 114 funds in the prior quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 3.7 million shares worth over $2 billion.
Overall UNH ranks first on our list of the best pharma dividend stocks to buy in 2024. While we acknowledge the potential of UNH 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 UNH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
