Large-Cap Global Pharma Stocks May Provide Appreciation and Income

 |  Includes: AZN, BMY, GSK, LLY, MRK, PFE, SNY
by: Zvi Bar

Many investors appreciate the pharmaceutical manufacturer industry for its potential to produce both income and long-term growth. Several large-cap drug makers offer above-average yields, and have records of growing their business and payouts over the long term. Additionally, historically many drug-makers have acted resiliently during previous economic downturns and recessions.

These companies are often considered defensive stocks. They still can go down, and most recently did, but many believe that this industry currently represents a strong long-term value. Also, several large pharmaceutical companies will continue to pay substantial dividends, benefit from emerging market growth and continue to develop new medical advancements. Further, medical price increases tend to outpace inflation.

Below are 7 drug manufacturers that have a market capitalization of at least $40 billion and yield at least 3.5 percent. I have also provided their 3-month, 6-month and 2011-to-date share performance rates.

1. AstraZeneca (NYSE:AZN)

  • Country: United Kingdom
  • Yield: 3.70%
  • 3-month: -8.83%
  • 6-month: 4.11%
  • 2011-to-date: -0.61%

2. Bristol-Myers Squibb (NYSE:BMY)

  • Country: United States
  • Yield: 4.07%
  • 3-month: 11.05%
  • 6-month: 19.35%
  • 2011-to-date: 22.55%

3. Eli Lilly (NYSE:LLY)

  • Country: United States
  • Yield: 5.26
  • 3-month: -1.13%
  • 6-month: 4.23%
  • 2011-to-date: 6.25%

4. GlaxoSmithKline (NYSE:GSK)

  • Country: United Kingdom
  • Yield: 4.92%
  • 3-month: -2.79%
  • 6-month: 6.67%
  • 2011-to-date: 8.02%

5. Merck (NYSE:MRK)

  • Country: United States
  • Yield: 4.84%
  • 3-month: -11.57%
  • 6-month: -5.79%
  • 2011-to-date: -12.82%

6. Pfizer (NYSE:PFE)

  • Country: United States
  • Yield: 4.39%
  • 3-month: -12.26%
  • 6-month: -10.15%
  • 2011-to-date: 4.11%

7. Sanofi-Aventis (NYSE:SNY)

  • Country: France
  • Yield: 3.97%
  • 3-month: -16.82%
  • 6-month: -8.25%
  • 2011-to-date: 3.43%

Most of these companies have been range bound since the August sell-off. See the 2011-to-date chart below:

Click to enlarge
(Click to enlarge)

By far, the best performing above-listed company within 2011 so far has been BMY, whose shares are up over 22%, with most of that gain made over the last two months. Additionally, like the rest of these large cap pharmaceutical makers, it paid out an above average dividend compared to the S&P 500’s 1.99% yield and 7.36% decline. Nonetheless, 5 of the seven's shares have appreciated so far in 2011, and only MRK’s shares underperformed the S&P 500 through the first three quarters of the year.

This group already provides an income investor a yield superior to a long-term bond, with far greater prospects of capital appreciation and yield growth. Moreover, it appears likely that several will institute dividend increases and/or stock buy-backs in the coming quarters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.