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Norman Tweed
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Retiree interested in stocks and financial instruments, especially dividend producing stocks. In the 20th century, I was an electrical engineer with Dominion Resources. I use a dividend growth investment style. Quick rules of thumb for complex questions, like fair value p/e using the Gordon... More
  • AstraZeneca (AZN)—Great Dividend Growth Stock 2 comments
    May 9, 2011 9:04 AM

    How would you like to buy a CCC stock with good yield + high dividend growth rate? Add to that a Chinese market exposure:

     

    seekingalpha.com/article/268076-astrazen...

     

    Finally, strong earnings per share growth and safety of principal provide an excellent investment.

     

    Let's look at the CCC status:

     

    7 year Challenger

    Dividend Growth Rates

    Yield 4.84%

    1yr 15.3% 5yr 18.6% 10yr 12%

    % over Graham Number 9.8%

    P/E 8.95

    Price 05/09/2011 $50.55

    Market Cap $72.034B

     

     

    Earnings Per Share 2010-2013

     

    $6.71

    $7.16

    $6.05

    $5.99

    2010

    2011

    2012

    2013

     

    The expected annual growth rate for the 5 year period is 15.5% (First Call).

     

    The gross margin will be 85-86% for 2011. However, patent expirations will lower earnings per share growth after 2011.

     

    What are the downsides of this stock? It is a foreign stock headquartered in the UK. It pays dividends twice per year in unequal installments. The first installment for 2011 was $1.85 on February 2, 2011 and the last installment is expected in August around $0.57. The stock has been cyclical since 1998 averaging around $50.

     

    We are moving into a defensive rotation in stocks. Healthcare sector is beginning to pick up, having risen 20% over the last year. If purchased today for speculation, a sell point should be figured in for 2013. If purchased for dividend + dividend growth rate, a fair p/e could be as high as 16.

     

    Norman Tweed

    05/09/2011

     

     

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Comments (2)
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  • MrPhilologist
    , contributor
    Comments (30) | Send Message
     
    Thanks for the followup article tweedn. AZN seems to be quite a profitable stock. However, its PEG value makes me think twice about it- an awful value of 20.20. What do you think about it ?
    9 May 2011, 11:50 AM Reply Like
  • Norman Tweed
    , contributor
    Comments (7462) | Send Message
     
    Author’s reply » If one needed additional exposure to healthcare, especially for the long run, then it would be a good addition. However, it pays only twice a year and the dividend is not regular. If one needed current exposure to the short term runup of the healthcare sector, other stocks might be more appropriate, even PFE. If one can't choose, an etf like VHT (+13.35% so far this year) (+19.12% from Jan 2010) might be the ticket.
    9 May 2011, 12:34 PM Reply Like
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