Sanofi Aventis: A High Yielding Pharma Stock With a Low Valuation

Aug.16.11 | About: Sanofi (SNY)

I have been using the recent sell-offs to pick up blue chip companies in defensive sectors that have high dividend yields. One I like here is Sanofi-Aventis.

Sanofi-Aventis (NYSE:SNY) - "Sanofi-Aventis engages in the discovery, development, and distribution of therapeutic solutions to improve the lives of everyone. The company offers a range of healthcare assets, including a broad-based product portfolio in prescription drugs, OTC/OTX, generics, vaccines, and animal health". (Business description from Yahoo Finance) Here are six reasons to like SNY at $35 - (click chart to enlarge)
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  1. It looks like it has medium-term technical support in the $33 to $35 range (See Chart)
  2. SNY provides a solid dividend yield of 3.8% and has raised its dividend payout by an average of 19% annually over the last five years.
  3. Sanofi – Aventis is selling at the bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
  4. SNY trades at just over 7 times this year’s expected earnings and consensus EPS for 2012 has risen over the past three months.
  5. The Genzyme acquisition should contribute meaningfully to EPS by 2013 as well as widening SNY’s footprint in biotechnology. S&P estimates the acquisition will contribute an incremental 50 to 70 cents to EPS by 2013.
  6. S&P has a price target of $44 on SNY and the median analyst target on Sanofi is $47 a share currently.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SNY over the next 72 hours.