Pharma stocks offering strong growth and dividend potential

AstraZeneca: A pharmaceutical powerhouse with a robust pipeline

​AstraZeneca, one of the UK's largest pharmaceutical companies, has been making waves in the industry with its exciting pipeline of new drugs. The company's revenue grew by an impressive 10% last year, demonstrating its strong market position. For income investors, AstraZeneca offers a rather low 1.85% dividend yield, though.

​While AstraZeneca has faced setbacks, such as the failure of its MYSTIC lung cancer drug trial, the company's resilience shines through. Its portfolio includes several promising late-stage treatments for cancer, heart disease, and other conditions, which could drive significant growth in the coming years.

​Analysts are optimistic about AstraZeneca's future, forecasting a 7% annual EPS growth over the next few years and rate the stock as a buy. According to LSEG Data & Analytics 8 analysts rate the stock as a strong buy, 13 as a buy, 7 as a hold and only 1 as a sell (as of 06/09/2024). This projection is based on the company's strong portfolio of existing medicines and its robust pipeline of new treatments.

​AstraZeneca’s share price is reflecting the company’s growth projections, outperforming not only the FTSE 100 but also its peers by a large margin, up 17% year-to-date (YTD).

​UK pharma stocks year-to-date performance comparison chart

​For investors looking to buy shares in the pharmaceutical sector, AstraZeneca remains a top UK pharma pick. Its combination of current performance and future potential makes it an attractive option for those seeking both growth and income.

GlaxoSmithKline: A dividend stalwart with turnaround potential

GlaxoSmithKline (GSK), another leading UK pharmaceutical firm, stands out with its 3.65% dividend yield. What makes GSK particularly appealing to dividend investors is its track record of consistency - the company has not cut its dividend in over two decades.

​GSK's ability to maintain its dividend is supported by steady cash flows from its vaccines and consumer healthcare products. This diversification provides a level of stability that many pure-play pharmaceutical companies lack.

​In recent years, GSK has undergone a strategic restructuring to focus on high-growth areas such as oncology and immunology. The acquisition of Tesaro has further strengthened its position in cancer treatments, demonstrating the company's commitment to future growth.

​Looking ahead, earnings are expected to rise by close to 6% annually in the coming years. According to LSEG Data & Analytics, analysts rate the share between a buy and a hold with 5 strong buy, 6 buy, 10 hold and 3 sell (as of 06/09/2024). The GSK share price has also outperformed the FTSE 100 by a large margin and is up by around 11% YTD.

​For investors seeking a combination of income and turnaround potential, GSK presents a compelling opportunity in the UK pharma stock market.

Hikma Pharmaceuticals: An emerging player in the UK pharma scene

​While not as large as AstraZeneca or GSK, Hikma Pharmaceuticals is rapidly making a name for itself as a fast-growing UK pharma stock. Specialising in generic drugs and injectable medications, Hikma is well-positioned to capitalise on the increasing demand for low-cost healthcare solutions.

​Hikma's financial performance has been impressive, with revenues and earnings growing at around 10% annually over the past few years. This growth trajectory is expected to continue, with consensus forecasts predicting double-digit EPS growth in the near future.

​Recently, Hikma has also entered the ranks of dividend-paying stocks, quickly raising its payout to offer an attractive yield of 3.09%. This combination of strong growth and emerging dividend makes Hikma an exciting stock for investors looking for both capital appreciation and income potential.

​According to LSEG Data & Analytics, most analysts share this positive outlook with 3 strong buy recommendations, 4 buy and 5 hold (as of 6/09/2024). Hikma’s share price is also outperforming the FTSE 100 and has so far risen by over 11.5% YTD (as of 06/09/2024).

The role of UK pharma stocks in a diversified portfolio

​UK pharmaceutical stocks like AstraZeneca, GSK, and Hikma can play a crucial role in a well-diversified investment portfolio. These companies offer a unique combination of growth potential, income through dividends, and relative stability due to the essential nature of their products.

​Moreover, as major exporters and employers, these pharma giants are significant contributors to the UK economy. Their global reach can provide investors with exposure to international markets, potentially offsetting risks associated with domestic economic fluctuations.

​During times of market turbulence, pharmaceutical stocks often demonstrate resilience due to the non-cyclical nature of healthcare demand. This characteristic can provide a degree of stability to investment portfolios, making UK pharma stocks an attractive option for risk-conscious investors.

How to invest in UK pharmaceutical stocks

​For investors interested in gaining exposure to the UK pharmaceutical sector, there are several options available. The most direct method is to buy shares in individual companies like AstraZeneca, GSK, or Hikma through a share dealing account. With us, you can buy UK shares from £3 and US shares from £0 - if you've traded 3+ times in the previous calendar month. Otherwise it's £8 for UK shares and £10 for US shares.

​Alternatively, investors can gain broader exposure to the sector through exchange-traded funds (ETFs) that focus on UK or global healthcare stocks. This approach can provide diversification benefits and reduce company-specific risks.

​Before investing, it's crucial to conduct thorough research and consider factors such as the company's financial health, pipeline potential, and competitive position. Investors may also want to consider using a demo account to practise trading strategies without risking real capital.

​Remember, while UK pharma stocks offer attractive opportunities, all investments carry risks. It's essential to align any investment decisions with your personal financial goals and risk tolerance.