Amgen (NASDAQ: AMGN) is one of the largest drug manufacturers in the world, with a market cap of more than $150 billion. It pays a dividend, has been growing steadily over the years, and has many growth opportunities and blockbusters in its portfolio. It has all the key ingredients that should make this a solid investment. But has it been a good buy over the past decade? Let's take a closer look at the stock's returns and whether you should consider investing in Amgen today.
Where was Amgen's stock 10 years ago?
On the first day of trading in 2014, shares of Amgen closed at a price of $115.80. If you had invested $20,000 into the business back then, you would have acquired approximately 173 shares of the company, assuming you bought it around that price.
Since then, Amgen's stock has been on a fairly steady incline, and on Monday, it closed at a price of $294.43. At that point, those 173 shares would have been worth approximately $50,936. That initial $20,000 investment would have increased by 155%.
But that's not all. Amgen is also a dividend stock, which means investors would pad those already strong gains with the recurring payments the company makes every quarter. If you had reinvested the dividend, your investment in Amgen would actually be worth around $67,910 today.
Now, compare this with how you would have done if you invested in the broad S&P 500 index. The results would actually turn out to be pretty similar, as a $20,000 investment in the S&P 500 back then would now be worth $65,670 when including dividends.
Amgen has been a great stock to own over the past 10 years, and it has even been a market-beating investment as well. Although it hasn't outperformed the S&P 500 by a huge margin, it has delivered superior gains to its investors.
Amgen's focus on growth has paid off for investors
Over the past decade, Amgen has become a bigger, more diversified business. In 2014, its product sales topped $19.3 billion. This past year, they totaled $26.9 billion, growing by 39% over the past 10 years. In 2014, the company had seven key blockbuster drugs that made up its top line. Today it has nine, and that number is likely to rise in the future.
Amgen hasn't been shy in spending money on acquisitions that it feels can grow its business. In October, it closed its $27.8 billion deal to acquire Horizon Therapeutics. Through that acquisition, Amgen gained a promising treatment for thyroid eye disease, Tepezza, along with Krystexxa, which is a drug used to treat gout. But it's Tepezza that's the prize, because it may generate peak annual sales of $3.9 billion.
In 2022, Amgen acquired ChemoCentryx for $3.7 billion. That acquisition gave it Tavneos, a treatment for anti-neutrophil cytoplasmic autoantibody-associated vasculitis, which is another potential blockbuster.
The company's financials look strong
Amgen's business is in excellent financial shape. It generated $7.4 billion in free cash flow last year while revenue of $28.2 billion rose by 7%. Although it's not a terribly rapidly expanding company, Amgen does have the resources at its disposal (i.e., cash) to allow it to continue pursuing growth opportunities in the future.
And with a payout ratio of 68%, the dividend looks safe as well. The stock's above-average 3.1% dividend yield gives investors plenty of incentive to hang on to the shares. The company has also increased its payout for 12 straight years.
Is Amgen stock a good buy?
There's a lot to like about Amgen. It generates plenty of cash and profits to support the long-term growth opportunities that are necessary for it to continue being a market-beating stock. The dividend sweetens the deal even further for investors, giving them an excellent source of recurring income.
Trading at just 15 times its expected future profits, the healthcare specialist also looks cheap. Amgen's stock could be a solid addition to any portfolio.
Should you invest $1,000 in Amgen right now?
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.
