Amgen Nearing Buy Point With Great Dividend and Fundamentals

Amgen Inc. AMGN is right near the bottom of a more than 6-year trend channel. 

That presents a potentially good buy point. The stock also has a long history of strong fundamentals. Therefore, this could be a trade that lasts two to six months, or it could be a long-term hold. 

The AMGN Entry Point

When AMGN bottomed in 2019, 2020, 2021, and 2022 the price made a low, bounced slightly, and then dropped to a slightly lower low. The rallies commenced after that.

In 2023 the price has made low near the prior established trendline. It has bounced slightly and now the wait begins to see if the price will make a slightly lower low again before commencing its rally back toward the top of the channel. 

(right click on the image, and select "Open image in new tab" to see the full-size version) 

Chart source: TradingView

The recent drop from the November peaks is 20%. Prior drops during this trend channel have been 21% to 28%. 

Wait to see if the price drops back below the Feb. 2 low of $236.37. If it does, and then rallies back up, consider a long trade if the price moves back above $244.50.

Even if the price doesn't make a new low, a rally above $244.50 could provide a good entry point, with a stop loss approximately 7% below. This gives the trade some room, but also limits risk in the event the price continues lower.

The AMGN Price Target

Prior rallies off the low of the channel have run 30% or more. Therefore, a target between $318 and $320 is 30% above the $244.50 entry.

The target, which is based on the historical pattern of the stock, also provides a nice reward/risk ratio. 30% upside versus 7% downside. 

There is also the option to hold this stock for the longer-term. The reasons for that are discussed next.

AMGN Fundamentals

Amgen has a strong fundamental history. Here are some summary points to consider.

• 35% yearly earnings per share (EPS) growth over the last five years. On the downside, that is expected to slow to 4.1% yearly growth over the next five. 
• AMGN has a dividend yield of 3.6%. It has increased the dividend every year for over 15 years. The dividend amount has increased an average of 10% per year over the last five years.
• It is one of the more stable stocks in the US market. Its biggest decline over the last decade is less than 30%. More than half of S&P 500 stocks have dropped at least 50%.
• The stock outperforms the S&P 500. AMGN had an annualized yearly return of 13.9% vs 12.6% for the SPDR S&P 500 Trust SPY over the last decade.

With a steadily growing dividend and EPS growth, historically smaller declines than most stocks, and strong long-term performance, this is a decent stock to also consider parking in the portfolio for the long term.

Disclaimer: The author has no current positions, but may initiate a position over the coming weeks if the conditions discussed materialize.