As we continue to refine our Team Alpha portfolio, we seek to strengthen the core stock assortment with a few more large cap, brand name, dividend winning companies. Right now we have a well balanced portfolio, well diversified across most major sectors.
Our portfolio now consists of; Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), AT&T (NYSE:T), General Electric (NYSE:GE), Annaly Capital (NYSE:NLY), Southern Company (NYSE:SO), Procter & Gamble (NYSE:PG), Intel (NASDAQ:INTC), Realty Income (NYSE:O), Coca-Cola (NYSE:KO), Bank of America (NYSE:BAC), American Capital Agency (NASDAQ:AGNC), Intel Wal-Mart (NYSE:WMT), Cisco (NASDAQ:CSCO), and 3M Company (NYSE:MMM).
Our focus today is on Bristol-Myers Squibb (NYSE:BMY), to add another pharmaceutical company stock. This sector is one sector that will continue to grow with each passing year, as our quest for life quality continues to wend its way through just about every and any potential treatment or cure for the debilitating afflictions that humans face.
The goal for enhancing our lives through medical breakthroughs and research is one that as an investor we can continually count on for long term growth, safety and stability. Even in the face of the inevitable setbacks that this industry faces.
With every set back, there is an advancement. Sort of like 1 step back, 2 steps forward. We hate that step back, but when those 2 giant steps forward occur, amazing things can happen.
Bristol-Myers Squibb Offers Retirees The 3 Ss We Seek
As with another big pharma favorite, Johnson & Johnson, BMY gives us the reliability as well as the potential for ongoing dividend growth and capital appreciation.
BMY has not been one of those 25 year "dividend champions," but as we can see the dividends have been stable for more than 10 years and in the last 3 years they have been increased by about 20% (from $.28/share to $.34/share, per quarter).
Right now the current yield stands at 4.25%.
In this chart we can see how the share price has been relatively stable, yet as the share price increased, as did the size and value of the company, the dividends were increased along with it.
When shareholder value is recognized as a priority alongside company growth, investors can feel more comfortable that we can share in the company's success. BMY has a solid payout ratio of about 60% which says to me they can continue to support the current dividend, and even have room for further increases as the company grows.
This chart shows how revenues have fluctuated yet overall have been maintained. As drugs complete their patent cycle revenues will tend to drop, but with new drugs approved for sale are patented and released into the market, a new wave of revenues begin to show up on the top and bottom lines.
Having a strong pipeline of drugs of all phases of trial is a hallmark of a strong pharmaceutical company. Bristol-Myers has stood the test of time in its very long and elite history in this department.
Some Fast Facts
Recently, TheStreet.com rated BMY as a buy citing a variety of positives that I completely agree with:
"The company has a P/E ratio of 15.3, equal to the average drugs industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Shares are down 9.7% year to date as of the close of trading on Thursday. Currently there are seven analysts that rate Bristol-Myers Squibb Company a buy, two analysts rate it a sell, and 11 rate it a hold.
TheStreet Ratings rates Bristol-Myers Squibb Company as a buy. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations, increase in stock price during the past year, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Given the fact that this $53 billion company also has a ridiculously low beta of .22, the volatility of the stock is greatly limited. For income seeking retirees, that spells STABILITY.
Since the drug pipeline is the "lifeblood" of any pharmaceutical company I would be remiss not to mention some of the more recent developments that have offered us a buying opportunity at the current share price.
As noted in this Barron's article;
Bank of America/Merrill Lynch analyst Gregg Gilbert is bullish on the major pharmaceutical companies, but he sees more opportunity in some than others.
"Bristol Myers Squibb (BMY) halted testing of a Hepatitis C pill earlier this month, a setback that has hurt shares. But Gilbert thinks the drop has created an opportunity. He raised his rating to Buy.
"We see BMY as somewhat riskier than our other Buys, as we believe more needs to go right from a pipeline delivery standpoint. But the recent sell-off following the HCV pipeline product setback makes this risk more palatable, in our view."
The company's dividend also makes it attractive, says Gilbert.
"We believe that pipeline setbacks could pressure the stock, but a strong dividend yield should limit downside risk."
The risk/reward here could also translate into some capital appreciation for our portfolio going forward. Adding that to the 4.25% dividend yield, and we have a really strong stock to add to our portfolio.
We will be adding 100 shares to our Team Alpha portfolio, on Monday 8/27. I believe it gives our portfolio some additional strength in a sector that always seems to perform quite well, both defensively and offensively.