With concern over the "Fiscal Cliff" and potential tax regime for 2013, many investors are rotating away from traditional sectors that provide large dividends, such as drug companies and utilities. This creates an odd conundrum, as these sectors have traditionally been invested in at times of financial difficulty because of the stability of their dividend payments and of their earnings. This may create opportunities for investors to profit within the drug sector. The companies below all have a market cap above $100 Billion and a dividend yield over 3.5%. This list is meant to be a base for further research.
Market Cap: $ 107 Billion
Dividend Yield: 5.34%
2013 Estimated PE: 11.4x
This British drug company has a diverse portfolio of drugs that it manufactures. The stock is pretty much flat in the past year, down around 2%. It trades for a lower earnings multiple than its peers in this article. It also sports a healthy 5.34% dividend yield. Many are encouraged by the drug pipeline that GSK has. GSK recently noted that it has had six drugs complete Phase III, which is a key step before attaining final FDA approval. Two of GSK's key drugs are Avodart and Zantac. Since many investors hold GSK for its healthy dividend, clarity toward U.S. dividend and capital gains tax rates for 2013 should provide more clarity for GSK investors.
Market Cap: $151 Billion
Dividend Yield: 3.98%
2013 Estimated PE: 11.6x
The Swiss drug company, Novartis has performed well in the market in the past year, with its stock up nearly 17%. It seems to be valued similarly to its peers. Diovan and Gleevec are two of the company's most successful drugs. It appears that Novartis has not been hit too badly by the European economic crisis. Novartis also sports a good dividend yield.
Market Cap: $135 Billion
Dividend Yield: 3.87%
2013 Estimated PE: 12x
Merck's stock has performed quite well over the past year, as it is up more than 25%. Historically, Merck is known for its hefty dividend payouts, and many investors own the name for that specific reason. The earnings valuation is more or less on par too with its peers. Some of Merck's leading drugs are Januvia and Isentress. The company and many investors are excited by revenue from mature drugs, which provide substantial cash flow, as well as by its cost-cutting measures.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.