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The high-dividend, large-cap healthcare stocks are among the safest stocks in the market. Demand for healthcare products has been increasing due to the aging of population. The innovations in the sector also boosted the companies’ profitability. In recent years, this sector has had higher returns than any other sector. The giants in this sector offer safe returns in a down market. I analyzed eight healthcare companies paying substantial dividends and priced with a maximum P/E ratio of 20. I have examined these stocks from a fundamental perspective, adding my O-Metrix Grading System where possible. Data obtained from Finviz/Morningstar and is current as of Aug.17.

Company

Ticker

P/E Ratio

Yield

Payout Ratio

DD O-Metrix Score

Abbott Lab.

ABT

15.29

3.83%

55.55%

6.5

AstraZeneca

AZN

8.2

5.75%

44.20%

8.29

Bristol-Myers Squibb

BMY

14.85

4.63%

85.02%

3.7

Eli Lilly

LLY

8.39

5.49%

48.12%

2.8

Johnson & J.

JNJ

15.37

3.55%

51.70%

4.8

Novartis

NVS

13.48

4.13%

45.23%

5.6

Pfizer

PFE

17.28

4.33%

74.82%

4.7

Sanofi Aventis

SNY

15.52

5.06%

78.53%

3.5

Abbott Laboratories is a global healthcare company engaged in discovering innovative medicines, technologies and techniques to provide healthcare solutions. Abbott Laboratories was founded in 1888 and is based in Abbott Park, Illinois. The market capital of this company is $78.06 billion and its P/E ratio is 15.29. Abbott has a forward P/E ratio of 10.05. The company increased its dividend payments by almost two-fold since 2001. While it paid $0.72 dividends per share annually in 2001, it will pay $1.92 dividends now. Abbott has a 3.83% dividend yield and the company will pay $0.48 dividends per share in the next quarter. Analysts' average target price is $56.43, implying 12% upside potential. Annualized EPS growth estimate 9.05% for the next five years. Based on these estimates, the stock has a DD O-Metrix score of 6.5.

AstraZeneca is a global, innovation-driven, integrated biopharmaceutical company. Astra Zeneca discovers, develops, manufactures and markets prescription medicines. The market capital of this company is $63.75 billion and its P/E ratio is 8.2. The forward P/E ratio is 7.73. AZN has 5.75% dividend yields and its beta is 0.59. The company will also pay $1.85 dividends in the next quarter. Net profit margin is 24.29%. Annualized EPS growth in the past five years was 13.87%. The analysts are not that optimistic about the future. The annualized EPS growth estimate for the next five years is 1.7%. Still, thanks to its fat dividend and low P/E ratio, AZN has a high DD O-Metrix score of 8.29.

Bristol-Myers Squibb is a global pharmaceutical company engaged in discovering, developing and delivering innovative medicines that help patients prevail over serious diseases. The company was founded in 1887 and is based in New York. The market capital of this company is $48.63 billion and its P/E ratio is 14.85. The forward P/E ratio of BMY is 13.91. BMY has a yield of 4.63% and its beta is 0.61. The company is expected to pay $1.32 of dividends for 2011. Current ratio of 1.97 and net profit margin of 24.27% are among the best in the industry. Recently, Bristol-Myers Company announced that the company has entered into a clinical collaboration agreement with Roche (OTCQX:RHHBY). With an annualized EPS growth estimate of 1.32%, BMY has a DD O-Metrix score of 3.68.

Eli Lilly & Co. was founded by Eli Lilly in 1876, and is headquartered in Indianapolis, Indiana. Eli Lilly develops productive alliances and partnerships that advance its capacity to develop innovative medicines at lower costs. The market capital of the company is $41.36 billion and its P/E ratio is 8.39. The company’s expected forward P/E ratio is 9.66 for the next fiscal year. LLY has a nifty yield of 5.49% and its beta is 0.79. For 2011, the company is expected to pay $1.96 dividends per share. The company has a good record of dividend hikes. Dividends increased by 75% in the last 10 years. While the company paid $1.12 dividends in 2001, this number will reach $1.96 for 2011. LLY has a good current ratio of 2.01, suggesting a strong balance sheet with no debt issues. Although LLY had 20.13% annual EPS growth rate in the past five years, the annual EPS growth estimate for the next five years is -6.48%. Still, the company has a DD O-Metrix score of 2.74.

Johnson & Johnson operates research and science-bringing innovative ideas, products and services to advance the health and well-being of people. JNJ is the world’s sixth-largest consumer health company and the world’s largest and most diverse medical devices company. The market capital of this company is $176 billion and its P/E ratio is 15.37. The forward P/E ratio is 12.17. JNJ has a yield of 3.55% and its beta is 0.61. The company will pay $2.28 dividends to each share for 2011. The Johnson & Johnson Dividend Reinvestment Program is available to registered shareholders of the company and allows for the reinvestment off all or a portion of dividends into additional shares of common stocks without any fees or commissions. This plan also provides making additional cash purchases of stock up to $50,000 per year for participants. With an annualized EPS growth estimate of 3.55%, JNJ has a DD O-Metrix score of 4.79.

Novartis International, founded in 1895, is a multinational pharmaceutical company based in Basel, Switzerland. The company provides research, development, manufacturing and marketing of healthcare products globally. The market capital of this company is $130.15 billion and its P/E ratio is 13.48. The company has a low forward P/E ratio of 9.87. Its dividend yield is 4.13% and its beta is 0.55. Based on an annualized EPS growth estimate of 4.75%, Novartis has a DD O-Metrix score of 5.57.

Pfizer is a global pharmaceutical company, founded in 1849 and headquartered in New York City. Pfizer is the world's number one pharmaceutical in terms of sales. The company provides prescription medicines for humans and animals worldwide. The market capital of the company is $144.26 billion and its P/E ratio is 17.28. The forward P/E ratio is 8.11. Pfizer has a yield of 4.33% and its beta is 0.71. This year, Pfizer will pay $0.8 dividends per share. The company also has the second highest current ratio (2.11) in this list. Analysts have an average target price of $23.25 implying 28% upside potential. Recently, Pfizer entered into a development and commercialization agreement of $255 million with Clovis Oncology. With an annualized EPS growth estimate of 3.27%, Pfizer has a DD O-Metrix score of 4.7.

Sanofi-Aventis was founded in 1970 and is headquartered in Paris, France. The company is a multinational pharmaceutical company and the world's fourth-largest in terms of sales revenue. Sanofi-Aventis engages in the research and development, manufacturing and marketing of pharmaceutical products for sale principally in the prescription market, but the firm also develops over-the-counter medications. The market capital of this company is $97.1 billion and its P/E ratio is 15.51. The company has a low forward P/E ratio of 7.73. SNY offers a yield of 5.06% and its beta is 0.85. Sanofi is expected to pay $1.82 dividends per share in this fiscal year. It has a DD O-Metrix score of 3.49.

Source: 8 Defensive High-Yield Pharmaceuticals to Consider