In a time of market fluctuation and uncertainty many are either holding or selling off their investments in the market. This is the time that the best investment is in mature companies with established dividends. By choosing mature companies you decrease your risk of stock price fluctuation and dividend decreases initiated by a companies board. We’ve identified five stock choices that fit into the criteria of high yield and low volatility. The five stock preferences are Pfizer (PFE), Merck (MRK), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), and Bristol Myer Squibb (BMY). All five company’s stock identified is a recommended buy.
Pfizer (PFE) – PFE over the last two years has seen fluctuation due to the market dips, but has balanced off with its recent dividend increase, acquisitions and stock $10 Billion share repurchase program. Although the pharmaceutical industry will face a down turn due to patent expiry and increased US government taxation, Pfizer has positioned itself to weather the storm. With the approval of new drug application (NDA) Tofacitinib and acceptance of accelerated review of NDA Eliquis, each drugs sales and market share will give Pfizer further revenue growth in the future. It is now commonplace for larger pharmaceuticals to acquire smaller companies or merge with its competitors to help ensure its future, Pfizer does not break this trend. Pfizer’s direct competitor Merck (MRK) two years ago acquired Schering Plough, which was a great move for Merck. It helped Merck’s exposure in the emerging markets as well as expands its animal health business. Pfizer has acquired Excaliard and Ferrosan consumer health business, which will strengthen its bio-ventures and consumer healthcare opportunities. With shored up revenue and cost cutting measures in place, Pfizer is a stable pick for the future. Current stock price is around $22.
Merck (MRK) – A now larger player, post merger, in the pharmaceutical industry, only second to Pfizer (PFE), Merck has sizeable market share with its shares trading around $37. Similar to others in the industry Merck has vowed to increase its bottom line by cutting 13,000 jobs by 2015 while recognizing synergies post merger. With the cut and five new expected drugs to come to market that will counter its patent expiry’s, Merck is in position to be the industry leader. There has been recent revenue growth from increased application of its products, such as Isentress available to children and Gardasil available to a larger range of women as well as men. Merck has also established joint ventures with its competitors to reduce R&D cost and risk, but increase revenue expansion. Victrelis is one of Merck’s joint deals with Roche (RHHBY.PK) that looks to rival Vertex Pharmaceuticals (VRTX) Incivek in treatment for hepatitis C. Merck has been one of the few in the industry that has vowed not to slash its R&D budget and I believe this will help Merck outperform in the long run.
Sanofi (SNY) – The company has the most growth prospect due to the fact its pipeline is strongest in biotech. The pharmaceutical industry is heading towards more and more bio-ventures. Sanofi shows strength in all the right places, high EPS 2.31, high dividend yield 4.90, low beta of 0.89, and low PE 15.58 and sizable market share at $96 Billion. With a low cost of entry at $36 per share and valuation’s that provide for a strong foundation to tread off fear of volatility it is a solid pick for compounding dividend’s to boost your investment. Sanofi has made key business strategies with acquisitions to secure its future unlike its competitor Abbott (ABT); which had a weak pipeline and many products coming off patent in 2012, forcing it to break off parts off the company.
Johnson & Johnson (JNJ) - A bellwether in the pharmaceutical industry with a market cap topping $175 billion with a diverse portfolio of pharmaceutical and consumer products; which gives a solid foundation for investors. The companies stock has a low beta of 0.54, which lowers the risk of stock price drops due to market fluctuation. Johnson & Johnson has also had many years of consecutive dividend growth. The stock is trading about 5% lower than its 52-week high due to recent voluntary recalls that didn’t meet its high quality of standard set for all product distribution, which has since corrected and begun distribution. JNJ has teamed up with a competitor Bristol Myer Squibb (BMY) to enter the hepatitis C market, which is expected to be a $10 billion dollar industry, to face its competitors Merck (MRK) & Roche (RHHBY.PK). There could be some favorability in sales for JNJ’s Tylenol Cold Flu Capsules while its competitor Novartis (NVS) will begin to see supply disruption for Theraflu. Finally Johnson and Johnson’s P/E ratio has been trending around 15 for the last two years, lower than the industry average around 19. Although the stock has a higher cost of $65 per share, the lower P/E and diverse business structure provide for a risk adverse stock.
Bristol Myers Squibb (BMY) – Unlike the others stock mentioned, it has been on the rise rather than staying flat. Even on the rise from $18 to $35 Bristol’s beta still remains low at 0.59. The board of directors recently increased the dividend by 3% showing confidence in the company’s future performance. Similar to its competitors Bristol Myers Squibb has been expanding into the emerging markets and acquiring other pharmaceuticals to broaden the company’s brand. Some of the key acquisitions are, but not limited to, Zymogenetics (ZGEN) which has a few late stage clinical drugs, the highlight being its hepatitis C drug that directly competes with Vertex (VRTX) and Merck (MRK). Bristol also acquired Amira Pharmaceuticals, expanding its inflammatory and fibrotic portfolio that adds future products to the pipeline. Future outlook is promising aside from these key acquisitions. In 2013 Bristol has many drugs coming out of the pipeline and it also has shown consistently with its gross profit rising year after year. Although its market cap is about half of the other company’s in this list it has established itself to continue to have an increase in gross profit for the next few years.