On Monday, Citigroup (C) upgraded four well-known names in the healthcare sector. That said, I take the opportunity to take a closer look at eight companies that yield at least 3.9%. The eight stocks on my list could indeed enhance any portfolio geared at investing for income or dividend reinvestment.
Johnson & Johnson (JNJ): JNJ currently trades at a P/E ratio of 17.03 and yields 3.9% ($2.44), making the stock very inexpensive by most standards. The company trades in a 52-week range of $25.69/share (52-week low) and $68.05/share (52-week high).
For investors looking to establish a position in JNJ, the stock is very attractive at these levels and a medium to large position should be initiated. The company is currently trading in the middle of its 52-week range and recently received FTC approval to acquire Synthes. JNJ continues to be a solid component of the Dow 30 and has surpassed analysts' estimates in each of the last four quarters.
Bristol-Myers Squibb (BMY): BMY currently trades at a P/E ratio of 15.33 and yields 4.0% ($1.36), making the stock affordable by most standards. The company trades in a 52-week range of $25.69/share (52-week low) and $35.44/share (52-week high).
BMY currently trades at the higher end of its 52-week range and has surpassed analysts' estimates in three out of the last four quarters. Even though the stock has a great yield and is considered to be cheap at these levels, I'd be interested to see how much BMY's new type II diabetes drug, dapagliflozin, contributes to the company's bottom if it receives FDA approval.
For potential investors, a small position at these levels would be best, and then either increase or decrease that position based on the company's earnings or upcoming dividend distributions.
Pfizer (PFE): PFE currently trades at a P/E ratio of 17.92 and yields 4.0% ($0.88), making the stock inexpensive by most standards. The company trades in a 52-week range of $16.63/share (52-week low) and $23.30/share (52-week high).
PFE currently trades at the higher end of its 52-week range and has beaten street estimates by an average of 5.6% in each of the last four quarters. On Monday, the Street.com reiterated its BUY rating on the stock noting that PFE currently carries a Debt-to-Equity ratio of 0.47 and a gross profit margin of 86.6%.
Investors looking to establish a position in PFE should do so with a medium to larger sized one. The company has paid a solid dividend and continues to surpass street estimates quarter after quarter.
Eli Lilly (LLY): LLY currently trades at a P/E ratio of 10.75 and yields 4.7% ($1.96), making the stock very cheap by most standards. The company trades in a 52-week range of $33.75/share (52-week low) and $42.03/share (52-week high).
LLY currently trades at the higher end of its 52-week range and has beaten street estimates by an average of 12.65% in each of the last two quarters. For investors looking to establish a position in LLY at these levels, I'd recommend doing so with a small to moderate sized stake. The company is currently involved in the development of several diabetes solutions, most notably an experimental version of insulin which controls blood sugar while helping patients lose weight.
Merck (MRK): MRK currently trades at a P/E ratio of 17.17 and yields 4.4% ($1.68), making the stock very inexpensive by most standards. The company trades in a 52-week range of $29.47/share (52-week low) and $39.50/share (52-week high).
MRK currently trades at the higher end of its 52-week range and has beaten street estimates by an average of 2.13% in each of the last three quarters. For investors looking to establish a position in MRK at these levels, I'd recommend doing so with a moderate sized investment based primarily on the company's earnings track record and dividend yield of 4.4%.
GlaxoSmithKline (GSK): GSK currently trades at a P/E ratio of 14.38 and yields 4.9% ($2.20), making the stock affordable by most standards. The company trades in a 52-week range of $38.76/share (52-week low) and $47.48/share (52-week high).
GSK currently trades in the middle of its 52-week range and has missed street estimates in three of the last four quarters. For those looking to establish a position in GSK, I'd suggest they err on the side of caution, and only establish a small position at this time.
Even though the 4.9% yield may be attractive, the company's recent earnings history isn't the greatest and until GSK can put together a string of EPS reports that surpass street estimates, I'm not entirely sold on a medium to moderate sized position.
Novartis (NVS): NVS currently trades at a P/E ratio of 14.67 and yields 4.7% ($2.48), making the stock very affordable by most standards. The company trades in a 52-week range of $51.20/share (52-week low) and $63.17/share (52-week high).
NVS currently trades at the lower end of its 52-week range and has beaten street estimates in two of the last four quarters by an average of 4.1%. Investors should note that NVS beat estimates in the second and fourth quarters of 2011 and missed estimates during the third quarter of 2011 and first quarter of 2012.
For those looking to establish a position in NVS, they should err on the side of caution, and only establish a small position at this time. I'd wait to increase my position until NVS can demonstrate better consistency when it comes to earnings.
AstraZeneca (AZN): AZN currently trades at a P/E ratio of 6.3 and yields 9.4% ($3.90), making the stock very inexpensive by most standards. The company trades in a 52-week range of $39.72/share (52-week low) and $51.60/share (52-week high).
AZN, which currently trades at the lower end of its 52-week range, attracts investors not only because of its 9.4% yield, but because its P/E ratio is just 6.3. For those looking to establish a position in AZN, they should acquire a medium position and add to that position as earnings and dividend dates approach.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
