For those investors looking for winners in this unsettled market, here are three stocks making yearly-highs (on Monday’s trade), and paying good dividend: Bristol-Myers Squibb (BMY), trading at $34.39 with a 4 percent dividend;. Altria Group (MO), trading at $29.39 with a 5.6 percent dividend; and Visa (V), trading at $98.60 and .90 percent dividend. How did they do it? What should investors do?
BMY enjoys a revival in the big pharma that has lifted all boats, especially BMY. As we wrote in a previous piece, big pharma had two setbacks in recent years: The first setback came from the prospect of the expiration of blockbuster stocks, and competition from generic makers like Mylan Labs (MYL) and Teva Pharmaceuticals (TEVA). The second setback came from proposed budgetary cuts for Medicaid and Medicare.
These setbacks have made many investors skeptical about the future of the industry, choosing to stay on the sidelines, especially during the recent market correction.
Last month’s earning reports from Bristol-Myers Squibb and Merck (MRK) suggests that investor concerns over these setbacks have been overblown, and that big pharma may be on the rebound thanks to a strategy of diversification and partnerships with start-ups that help them bring new products to the market.
The two companies, together with their major peers, including Pfizer (PFE), Abbott Laboratories (ABT), Eli Lily (LLY) and Merck, enjoy strong financials, which could help them overcome any further setback from budgetary cuts and generics competition; and continue paying hefty dividend, north of 4 percent.
Altria Group is in two business, tobacco manufacturing and sales, and wine sales. Both businesses are little sensitive to economic conditions as demand for these products is inelastic, due to consumer addiction. This means that the company has a great deal of pricing power that translates into higher revenues and profitability that allow it to pay a 5.60 percent dividend.
Visa, together with the Master Card (MA) enjoy a duopoly in the credit card transaction business. This means that the company has little competition, so it can enjoy steady fees and hefty profit margins, even in a sluggish economy.
While past performance isn’t a guarantee for future performance, conservative investors may want to stick with these stocks, as economic conditions aren’t expected to improve any time soon. Enjoying capital appreciation and collecting a hefty dividend in a slow-growth and near zero interest rate environment isn’t a bad investment strategy.