With a market value recently near $65 billion, Biogen (Nasdaq: BIIB) is a biotech giant. Its stock has slumped lately, due to disappointing second-quarter earnings and an overall beat-down of biotech stocks, giving interested investors a cheaper entry price.
Biogen’s top seller is its multiple sclerosis (MS) drug Tecfidera, sales of which have been growing briskly, but more slowly than many had expected. Three of Biogen’s MS drugs (Avonex, Tysabri and Fampyra) experienced year-over-year sales declines in the second quarter.
On the other hand, Biogen’s pipeline features MS drug daclizumab, which could generate billions of dollars for Biogen if approved, and an Alzheimer’s drug, aducanumab. Seemingly promising treatments for Alzheimer’s disease have flopped in the past, but if one earns approval, it will likely prove quite profitable. An anti-LINGO drug also has the potential to be a blockbuster because it attacks MS in a different way than current therapies do.
Biogen is also aiming to profit via label expansions for MS drugs Tysabri and Tecfidera and blood cancer drug Gazyva — getting the already approved drugs sanctioned for new treatments. With ample cash, it can also buy other companies’ promising drugs.
It takes years for drugs to move through clinical trials, and FDA approval is never guaranteed. Still, there’s a lot for patient investors to be hopeful about with Biogen. (The Motley Fool has recommended Biogen.)
Ask the Fool
Q: Should I sell some or all of my low-dividend-yield companies and buy more of the high-yield ones? – E.E., Corn Brook, Indiana
A: High yields can be enticing, as they’ll generate lots of dollars. But companies with low or no dividend payments can also be solid performers. A company with no dividend may have more pressing uses for its excess cash than paying it out to shareholders, such as if it’s investing in further growth by building more factories, hiring more people or buying more advertising.
Meanwhile, among companies that do pay dividends, the dividend growth rate matters a lot. A 2 percent yield can be more attractive than a 3 percent one – if the company has been upping its payouts significantly in recent years. If so, that dividend could quadruple over a decade, while the once-higher dividend, if it grows more slowly, may not even double. Consider that while both Clorox and Boeing recently had yields of 2.5 percent, Clorox’s five-year average dividend growth rate was 7 percent, while Boeing’s was 17 percent.
To see a list of recommended dividend-paying stocks, try our Motley Fool Income Investor newsletter for free, at fool.com/shop/newsletters.
Q: What’s the tax rate when you sell a stock? — M.L., Eastover, North Carolina
A: The long-term capital gains tax rate, which applies to assets held for more than a year, is currently 15 percent for most people. Short-term gains, from stocks held a year or less, are taxed at your ordinary income tax rate, which can approach 40 percent but is 25 percent for most of us. Patience can clearly pay off for stock investors. (Remember that tax rates can change over time.)
My smartest investment
In December 1967, at my father-in-law’s suggestion, my wife and I purchased 10 shares of stock in AT&T for $67 per share, costing us almost $700. In today’s dollars, adjusted for inflation, that would amount to almost $4,800 — a rather significant sum.
A few months later, my cousin also bought shares. My wife and I kept our shares, putting the dividends we received into savings or into more stock in other blue chip companies. My cousin, however, felt that he was not gaining enough from his investment in AT&T and sold his shares three years later, putting the proceeds into a savings account. I think we did better than he did. — P.S., Mansfield, Connecticut
The Fool responds: AT&T has been a solid long-term investment for patient investors, though it has hardly been a stable enterprise. Over the years it got broken up, and following that, there were many mergers between the “Baby Bells,” and AT&T ended up largely reassembled. Not standing still, AT&T has recently bought DirecTV.
Interest from savings accounts, over the long run, will pale next to the growth of the stock market and the dividends it often kicks out. Patience is important, though, as the overall market and individual stocks can go through periods of decline or stagnation.
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