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I am a private investor who has invested in individual stocks for over a decade. I have a BBA from the University of Texas at Austin. I am retired and living off of dividends and distributions from a portfolio of BDCs, consumer staple stocks, MLPs, regional banks and REITs.
  • Health Care Stat Update 2-20-14 2 comments
    Feb 21, 2014 10:35 AM

    I started due diligence on Health Care stocks in 2014. Prior to this year, the only health care stocks I owned were via mutual funds - and in Health Care REITs. After a series of sermons from my pastor, I became aware that I was tithing on my visible income. I was re-investing the dividends on all my mutual funds. That income never hit my bank account. It was not visible income. I wanted to stop generating so much invisible income. I wanted to true-up my tithe. To do that, I needed to generate more income from dividends. So - I am killing two birds with one stone: (1) achieving portfolio diversification by starting some investments in Health Care and (2) generating extra income. I felt guilty about investing so heavily in growth stocks - so I added a BDC investment at the same time.

    To summarize - I still know next to nothing about the Health Care sector. I only know what the numbers are telling me. They are telling me a lot. I have provided a few spreadsheets on that sector below.

    I had expected that a good health care portfolio would be heavy in stocks we all hear about - like BMY, JNJ, LLY, MRK and PFE. The valuations that I am generating currently say to avoid those big and familiar names. I expect to tell more of the sector's story as time goes by. The data below does not tell the full story - but it still says a lot.

    Health Care 02-20-14

    Yield in the spreadsheet below is based on the Q1-14 dividend. Spreadsheet header abbreviations: Div = dividend; EPS = earnings per share; LTM = last twelve months; YTD = year to date. The dividend to EPS ratio is a measure of dividend safety. At this point in time, companies that pay dividends once per year have had their payouts divided by four and encoded in this data is if they paid a quarterly dividend. ABBV has announced an increase in its Q2-14 div to $0.42/share payable 5-15-14.


        12-31-13 02-20 Div Current Div/ Div/ Percent Change
    Company Price Price /Quater Yield EPS13 EPS14 Price Pr+Div EPS14 Target Div 1yr Div 3yr

    AbbVie (NYSE:ABBV) 52.81 51.86 0.400 3.09 51 % 51 % -1.80 -1.80 -1.89 9.59 0.00 na
    Amerisource (NYSE:ABC) 70.31 68.39 0.235 1.37 30 % 25 % -2.73 -2.73 0.00 15.46 11.90 45.00
    Abbott (NYSE:ABT) 38.33 38.95 0.220 2.26 44 % 40 % 1.62 1.62 0.00 13.39 57.14 1.42
    Allergan (NYSE:AGN) 111.08 127.25 0.050 0.16 4 % 4 % 14.56 14.56 0.18 13.00 0.00 0.00
    Amgen (NASDAQ:AMGN) 114.08 123.49 0.610 1.98 32 % 30 % 8.25 8.25 -0.37 8.87 29.79 na
    AstraZenica (NYSE:AZN) 59.37 66.62 0.700 4.20 55 % 64 % 12.21 12.21 -6.22 -0.71 0.00 1.23
    Baxter (NYSE:BAX) 69.55 69.35 0.490 2.83 42 % 38 % -0.29 0.42 0.19 13.19 8.89 19.35
    Bayer (OTCPK:BAYRY) 142.00 139.09 0.617 1.77 32 % 30 % -2.05 -2.05 -6.47 19.22 0.00 6.72
    CR Bard (NYSE:BCR) 133.94 140.30 0.210 0.60 15 % 10 % 4.75 4.91 6.65 8.50 5.00 5.56
    Becton (NYSE:BDX) 110.49 115.52 0.545 1.89 38 % 35 % 4.55 4.55 0.00 8.33 10.10 10.98
    Bristol-Myers (NYSE:BMY) 53.15 53.85 0.360 2.67 79 % 81 % 1.32 1.98 0.00 7.48 2.86 3.03
    Covidien (COV) 68.10 71.28 0.320 1.80 34 % 32 % 4.67 4.67 14.90 11.91 39.13 26.93
    Glaxo (NYSE:GSK) 53.39 56.22 0.615 4.38 66 % 66 % 5.30 6.45 -3.38 16.69 -10.74 0.00
    JandJ (NYSE:JNJ) 91.59 91.72 0.660 2.88 48 % 45 % 0.14 0.14 -0.17 14.05 8.20 7.41
    Lily (NYSE:LLY) 51.00 58.05 0.490 3.38 47 % 70 % 13.82 13.82 0.36 5.31 0.00 0.00
    McKesson (NYSE:MCK) 161.40 177.58 0.240 0.54 15 % 12 % 10.02 10.02 -2.50 14.39 20.00 11.11
    Medtronic (NYSE:MDT) 57.39 57.00 0.280 1.96 30 % 29 % -0.68 -0.19 0.00 13.38 7.69 8.15
    Merck (NYSE:MRK) 50.05 55.81 0.440 3.15 50 % 51 % 11.51 12.39 -0.86 5.38 2.33 5.26
    Noradisk (NYSE:NVO) 36.95 44.42 0.159 1.43 38 % 34 % 20.22 20.22 37.96 -1.33 0.00 25.05
    Novartis (NYSE:NVS) 80.38 82.28 0.632 3.07 50 % 47 % 2.36 2.36 -2.01 5.62 0.00 2.51
    Pfizer (NYSE:PFE) 30.63 31.55 0.260 3.30 47 % 46 % 3.00 3.00 0.00 10.10 8.33 10.00
    Perrigo (NYSE:PRGO) 153.46 161.03 0.105 0.26 7 % 6 % 4.93 4.93 -0.15 8.61 16.67 16.67
    Roche (OTCQX:RHHBY) 70.20 74.54 0.505 2.71 53 % 49 % 6.18 6.18 -2.81 11.30 8.71 5.90
    St. Jude (NYSE:STJ) 61.95 67.93 0.250 1.47 27 % 25 % 9.65 10.06 0.00 14.61 0.00 6.35
    Stryker (NYSE:SYK) 75.14 82.65 0.305 1.48 29 % 25 % 9.99 10.40 0.00 39.59 15.09 23.15
    Teva (NYSE:TEVA) 40.08 48.20 0.326 2.71 26 % 28 % 20.26 20.26 -0.22 1.88 5.16 17.21
    Thermo (NYSE:TMO) 111.35 124.71 0.150 0.48 11 % 9 % 12.00 12.13 1.04 11.29 0.00 na
    Zimmer (ZMH) 93.19 95.30 0.200 0.84 14 % 13 % 2.26 2.48 0.00 9.12 0.00 na
    Zoetis (NYSE:ZTS) 32.69 29.97 0.072 0.97 20 % 19 % -8.32 -8.32 -4.32 17.75 11.54 na

    Average         2.06 36 % 35 % 5.78 5.96 1.03 11.24 8.89 10.79

    With the 10 Treasury at 2.75% and the sector average yield [on Q1 Divs] at 2.06% - the spread is -69 basis points.
    The cap weighted ETF XLV is up 6.28% year to date - with dividends its total return is 6.28%.
    * The change in the dividend is for the last twelve months and not year to date.

    Dates used to credit dividends:

    ABBV : 2-13-14 ABT : 02-14-14 AGN: 12-10-13 AMGN: 03-06-14 AZN: 09-15-13 BAX : 01-02-14 BAYRY: yearly
    BCR: 01-30-14 BDX;: 03-30-14 BMY;: 02-02-14 COV: 02-19-14 GSK: 01-08-14 JNJ: 03-10-14 LLY : 03-09-14
    MCK: 03-31-14 MDT: 04-25-14 MRK: 01-07-14 NVO: yearly NVS: 04-04-14 PFE: 03-03-14 PRGO: 03-17-14
    RHHBY: yearly STJ: 01-30-14 SYK: 01-30-14 TEVA: 12-02-13 TMO : 01-14-14 ZMH: 01-30-14 ZTS : 03-03-14

    The Predictive Power of the EPS/Dividend Ratios on Valuations: Dividend to EPS ratios range from as low as the teens to the 80s - and may look all too random. But this ratio - during most time periods - helps explain the variety of yields and P/E ratios. There is some correlation to YTD price changes as well.

    The following stocks had Q1-14 Dividend/EPS ratios of less than 25%: AGN , BCR , MCK , PRGO , TMO , ZMH , ZTS . Their YTD mean price gain = 5.74% and 3 of the 7 beat the sector mean yearly price gain [5.78%]. Their mean yield = 0.53% and they had an average price/earnings ratio = 19.93.

    The following had Q1-14 Dividend/EPS ratios of more than 25% - but less than 40%: ABC , ABT , AMGN , BAX , BAYRY , BDX , COV , MDT , NVO , STJ , SYK , TEVA . Their YTD mean price gain = 6.12% and 5 of the 12 beat the sector mean yearly price gain [5.78%]. Their mean yield = 1.79% - and they sold at an average price/earnings ratio = 16.77.

    The following had Q1-14 Dividend/EPS ratios of more than 40% - but less than 50%: JNJ , NVS , PFE , RHHBY . Their YTD mean price gain = 2.92% and 1 of the 4 beat the sector mean yearly price gain [5.78%]. Their mean yield = 2.93% - and they sold at an average price/earnings ratio = 15.73.

    The following companies had Q1-14 Dividend/EPS ratios of more than 50%: ABBV , AZN , BMY , GSK , LLY , MRK . Their YTD mean price gain = 7.06% and 3 of the 6 beat the sector mean yearly price gain [5.78%]. Their mean yield = 3.47% - and they sold at an average price/earnings ratio of 19.04.

    Earnings Growth & P/E Ratios 02-20

    Fiscal and calendar years are not in sync.


      Earnings / Share Earn. Growth P/E Ratios 14 EPS Range
    Co. 2009 2010 2011 2012 2013 2014 2015 12-13 13-14 14-15 2013 2014 2015 High Low Range

    ABBV 0 0 0 0 314 311 356 na -0.96% 14.47% 16.52 16.68 14.57 330 307 7.40%
    ABC 167 219 251 276 314 369 430 13.77% 17.52% 16.53% 21.78 18.53 15.90 375 363 3.25%
    ABT 0 0 0 174 201 220 247 15.52% 9.45% 12.27% 19.38 17.70 15.77 231 212 8.64%
    AGN 0 0 0 414 477 547 618 15.22% 14.68% 12.98% 26.68 23.26 20.59 575 524 9.32%
    AMGN 491 521 533 651 760 814 869 16.74% 7.11% 6.76% 16.25 15.17 14.21 864 776 10.81%
    AZN 0 0 0 641 506 437 443 -21.06% -13.64% 1.37% 13.17 15.24 15.04 500 441 13.50%
    BAX 380 398 431 453 467 514 549 3.09% 10.06% 6.81% 14.85 13.49 12.63 518 500 3.50%
    BAYRY 0 0 0 688 783 824 na 13.81% 5.24% na 17.76 16.88 na 792 792 0.00%
    BCR 509 560 640 657 578 818 915 -12.02% 41.52% 11.86% 24.27 17.15 15.33 828 720 13.20%
    BDX 495 490 533 537 581 623 682 8.19% 7.23% 9.47% 19.88 18.54 16.94 652 618 5.46%
    BMY 0 216 228 199 182 177 169 -8.54% -2.75% -4.52% 29.59 30.42 31.86 186 170 9.04%
    COV 284 338 397 426 372 401 450 -12.68% 7.80% 12.22% 19.16 17.78 15.84 410 395 3.74%
    GSK 0 0 0 353 373 372 420 5.67% -0.27% 12.90% 15.07 15.11 13.39 401 361 10.75%
    JNJ 463 476 500 510 552 583 628 8.24% 5.62% 7.72% 16.62 15.73 14.61 602 579 3.95%
    LLY 442 474 441 339 415 282 319 22.42% -32.05% 13.12% 13.99 20.59 18.20 288 275 4.61%
    MCK 407 462 486 638 633 818 1071 -0.78% 29.23% 30.93% 28.05 21.71 16.58 885 811 9.05%

      Earnings / Share Earn. Growth P/E Ratios 14 EPS Range
    Co. 2009 2010 2011 2012 2013 2014 2015 11-12 12-13 13-14 2012 2013 2014 High Low Range

    MDT 292 322 337 346 375 382 409 8.38% 1.87% 7.07% 15.20 14.92 13.94 385 380 1.31%
    MRK 325 342 377 382 349 345 372 -8.64% -1.15% 7.83% 15.99 16.18 15.00 375 307 19.71%
    NVO 0 0 0 0 167 189 213 na 13.17% 12.70% 26.60 23.50 20.85 189 187 1.06%
    NVS 0 0 0 0 501 537 557 na 7.19% 3.72% 16.42 15.32 14.77 570 521 9.12%
    PFE 202 222 231 219 222 227 237 1.37% 2.25% 4.41% 14.21 13.90 13.31 232 220 5.29%
    PRGO 0 293 401 499 561 661 791 12.42% 17.83% 19.67% 28.70 24.36 20.36 673 648 3.78%
    RHHBY 0 274 279 325 384 415 451 18.15% 8.07% 8.67% 19.41 17.96 16.53 432 415 4.10%
    STJ 234 301 328 239 376 398 430 57.32% 5.85% 8.04% 18.07 17.07 15.80 402 393 2.26%
    SYK 295 333 372 407 423 483 525 3.93% 14.18% 8.70% 19.54 17.11 15.74 489 448 8.49%
    TEVA 336 454 497 535 501 458 451 -6.36% -8.58% -1.53% 9.62 10.52 10.69 576 410 36.24%
    TMO 0 0 416 494 542 681 783 9.72% 25.65% 14.98% 23.01 18.31 15.93 693 564 18.94%
    ZMH 394 433 480 530 575 621 679 8.49% 8.00% 9.34% 16.57 15.35 14.04 630 583 7.57%
    ZTS 0 0 0 108 142 155 175 31.48% 9.15% 12.90% 21.11 19.34 17.13 170 154 10.32%

    BDC Average           7.84 7.22 10.05 19.22 17.86 16.27     8.97

    Dividend History [based on Q4 Divs]


      Dividends/Share/Quarter Percentage Dividend Growth Average
    Co. 2005 2006 2007 2008 2009 2010 2011 2012 2013 07-08 08-09 09-10 10-11 11-12 12-13 2011-13

    ABBV 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.400 na na na na na na na
    ABC 0.013 0.025 0.037 0.050 0.080 0.100 0.130 0.210 0.235 33.33 60.00 25.00 30.00 61.54 11.90 36.72
    ABT 0.132 0.141 0.156 0.173 0.192 0.211 0.230 0.244 0.140 10.90 10.98 9.90 9.00 6.09 -42.62 -18.27
    AGN 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.00 0.00 0.00 0.00 0.00 0.00 0.00
    AMGN 0.000 0.000 0.000 0.000 0.000 0.000 0.280 0.360 0.470 na na na na 28.57 30.56 29.56
    AZN 0.256 0.352 0.437 0.475 0.512 0.602 0.675 0.700 0.700 8.70 7.79 17.58 12.13 3.70 0.00 1.85
    BAX 0.145 0.145 0.218 0.260 0.290 0.310 0.335 0.450 0.490 19.27 11.54 6.90 8.06 34.33 8.89 21.61
    BAYRY 0.183 0.285 0.333 0.531 0.452 0.471 0.513 0.544 0.617 59.46 -14.84 4.09 9.09 5.98 13.38 9.68
    BCR 0.130 0.140 0.150 0.160 0.170 0.180 0.190 0.200 0.210 6.67 6.25 5.88 5.56 5.26 5.00 5.13
    BDX 0.215 0.245 0.285 0.330 0.370 0.410 0.450 0.495 0.495 15.79 12.12 10.81 9.76 10.00 0.00 5.00
    BMY 0.280 0.280 0.280 0.310 0.320 0.330 0.340 0.340 0.350 10.71 3.23 3.13 3.03 0.00 2.94 1.47
    COV 0.000 0.000 0.000 0.000 0.000 0.177 0.199 0.230 0.320 na na na 12.43 15.58 39.13 27.35
    GSK 0.355 0.451 0.533 0.475 0.490 0.507 0.543 0.579 0.615 -10.88 3.16 3.47 7.10 6.63 6.22 6.42
    JNJ 0.330 0.375 0.415 0.460 0.490 0.540 0.570 0.610 0.660 10.84 6.52 10.20 5.56 7.02 8.20 7.61
    LLY 0.380 0.400 0.425 0.470 0.490 0.490 0.490 0.490 0.490 10.59 4.26 0.00 0.00 0.00 0.00 0.00
    MCK 0.000 0.000 0.110 0.120 0.125 0.180 0.200 0.200 0.240 9.09 4.17 44.00 11.11 0.00 20.00 10.00
    MDT 0.000 0.000 0.000 0.000 0.000 0.225 0.243 0.260 0.280 na na na 8.00 7.00 7.69 7.34
    MRK 0.380 0.380 0.380 0.380 0.380 0.380 0.420 0.430 0.440 0.00 0.00 0.00 10.53 2.38 2.33 2.35
    NVO 0.021 0.024 0.030 0.019 0.052 0.070 0.091 0.125 0.159 -36.67 173.68 35.19 29.30 37.29 27.56 32.43
    NVS 0.223 0.223 0.270 0.366 0.430 0.500 0.588 0.615 0.632 35.56 17.49 16.28 17.64 4.56 2.85 3.70
    PFE 0.190 0.240 0.290 0.320 0.160 0.180 0.200 0.220 0.240 10.34 -50.00 12.50 11.11 10.00 9.09 9.55
    PRGO 0.043 0.045 0.050 0.055 0.063 0.070 0.080 0.090 0.090 10.00 14.55 11.11 14.29 12.50 0.00 6.25
    RHHBY 0.105 0.120 0.172 0.261 0.265 0.348 0.429 0.465 0.505 51.74 1.61 31.32 23.27 8.26 8.71 8.49
    STJ 0.000 0.000 0.000 0.000 0.000 0.000 0.210 0.230 0.250 na na na na 9.52 8.70 9.11
    SYK 0.027 0.055 0.083 0.100 0.150 0.180 0.213 0.265 0.305 21.21 50.00 20.00 18.33 24.41 15.09 19.75
    TEVA 0.064 0.079 0.101 0.117 0.158 0.193 0.219 0.257 0.326 15.84 35.04 22.15 13.47 17.35 26.85 22.10
    TMO 0.000 0.000 0.000 0.000 0.000 0.000 0.130 0.150 0.150 na na na na 15.38 0.00 7.69
    ZMH 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.180 0.200 na na na na na 11.11 na
    ZTS 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.065 na na na na na na na

    Total Return Expectations


    Co Yield CAGR Total Rtn My RRRs TR - RRR

    ABBV 3.09% 5.00% 8.09% 9.50 -1.41
    ABC 1.37% 12.00% 13.37% 10.00 3.37
    ABT 2.26% 9.00% 11.26% 9.50 1.76
    AGN 0.16% 4.00% 4.16% 10.00 -5.84
    AMGN 1.98% 8.50% 10.48% 10.00 0.48
    AZN 4.20% 2.00% 6.20% 9.20 -3.00
    BAX 2.83% 7.50% 10.33% 9.50 0.83
    BAYRY 1.77% 8.00% 9.77% 9.80 -0.03
    BCR 0.60% 9.00% 9.60% 12.50 -2.90
    BDX 1.89% 8.50% 10.39% 9.50 0.89
    BMY 2.67% 3.00% 5.67% 10.00 -4.33
    COV 1.80% 9.50% 11.30% 9.50 1.80
    GSK 4.38% 4.50% 8.88% 9.50 -0.62
    JNJ 2.88% 6.00% 8.88% 9.00 -0.12
    LLY 3.38% 0.10% 3.48% 9.40 -5.92
    MCK 0.54% 12.00% 12.54% 10.50 2.04
    MDT 1.96% 6.80% 8.76% 9.20 -0.44
    MRK 3.15% 3.00% 6.15% 10.00 -3.85
    NVO 1.43% 9.20% 10.63% 10.00 0.63
    NVS 3.07% 5.00% 8.07% 9.20 -1.13
    PFE 3.30% 3.50% 6.80% 9.20 -2.40
    PRGO 0.26% 11.00% 11.26% 10.00 1.26
    RHHBY 2.71% 7.50% 10.21% 9.50 0.71
    STJ 1.47% 9.10% 10.57% 9.50 1.07
    SYK 1.48% 9.00% 10.48% 10.50 -0.02
    TEVA 2.71% 5.00% 7.71% 10.50 -2.79
    TMO 0.48% 12.00% 12.48% 10.50 1.98
    ZMH 0.84% 9.10% 9.94% 10.00 -0.06
    ZTS 0.97% 11.00% 11.97% 11.00 0.97

    Average 2.06% 7.23% 9.29%

    Disclosure: I am long ABC, ABT, AMGN, BAX, NVO, STJ, SYK.

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Comments (2)
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  • Dividend Sleuth
    , contributor
    Comments (4984) | Send Message
     
    Thanks for sharing your excellent work, Factoids. It is very helpful to see the relative dividends and growth rates on the charts you provided and to hear your analysis. This will merit some study!
    22 Feb 2014, 04:10 PM Reply Like
  • Factoids
    , contributor
    Comments (1160) | Send Message
     
    Author’s reply » I should note that my original plan was to also buy shares in RHHBY. But the ADR (or ADS) for Roche traded on the "pink sheets" - and the brokerage I used did not allow retail investors to buy pink sheet stocks from them.

     

    Also - I should note that "EPS projection accuracy" is a key component in setting my RRRs (required rates of return) in a sector. I did some "outside of the box" thinking on gathering that data. I am not going to share that in a post inside of my blog - a blog which fails to generate income (note the absence of advertising of this page - and all SA blog pages). I will get around to posting an article on that - once I get over the fear of posting a long article on a sector I still know next to nothing about.

     

    Last note - I did 10 year dividend income projection spreadsheets on a test portfolio which contained some stocks with dividend yields under 1%. Adding those stocks crashed my dividend yield without adding much div growth. Even with high dividend growth, there is something like "force = mass times acceleration" going on in that calculation. Divs under 1% lacked the "mass" to generate much force in my portfolio dividend growth. So I made a gut decision that sub 1% yielding stocks were "stocks for other people".
    22 Feb 2014, 04:56 PM Reply Like
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