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Health Care Or Pharma Update Of 3-14-14

This is part two of the Dividend/EPS series - with those stats posted at the end of the message. And the purpose of this is to prep my audience for the atypical stats in Health Care REITs that are about to come.

Health Care 03-14-14

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.RHHBY had a two for one stock split on 2-27-14 -- and that change in not reflected in the data below.


    12-31-13 03-14 Div Current Div/ Div/ Percent Change
Company Price Price /Quarter Yield EPS14 EPS15 Price Pr+Div EPS14 Target Div 1yr Div 3yr

AbbVie (NYSE:ABBV) 52.81 51.21 0.400 3.12 51 % 44 % -3.03 -2.27 -1.89 9.97 0.00 na
Amerisource (NYSE:ABC) 70.31 67.57 0.235 1.39 25 % 22 % -3.90 -3.56 0.00 16.52 11.90 45.00
Abbott (NYSE:ABT) 38.33 38.97 0.220 2.26 40 % 36 % 1.67 2.03 0.00 13.72 57.14 1.42
Allergan (NYSE:AGN) 111.08 128.34 0.050 0.16 4 % 3 % 15.54 15.58 0.18 15.05 0.00 0.00
Amgen (NASDAQ:AMGN) 114.08 122.54 0.610 1.99 30 % 28 % 7.42 7.83 -0.24 9.33 29.79 na
AstraZenica (NYSE:AZN) 59.37 65.30 0.700 4.29 66 % 66 % 9.99 9.99 -8.58 6.38 0.00 1.23
Baxter (NYSE:BAX) 69.55 66.49 0.490 2.95 38 % 36 % -4.40 -3.70 0.00 13.19 8.89 19.35
Bayer (OTCPK:BAYRY) 142.00 132.15 0.617 1.87 30 % 26 % -6.94 -6.94 -6.13 19.22 0.00 6.72
CR Bard (NYSE:BCR) 133.94 144.92 0.210 0.58 10 % 9 % 8.20 8.35 6.78 9.01 5.00 5.56
Becton (NYSE:BDX) 110.49 115.35 0.545 1.89 35 % 32 % 4.40 4.40 0.00 8.33 10.10 10.98
Bristol-Myers (NYSE:BMY) 53.15 54.00 0.360 2.67 81 % 86 % 1.60 2.26 0.56 10.19 2.86 3.03
Covidien (COV) 68.10 70.26 0.320 1.82 32 % 28 % 3.17 3.64 14.90 13.47 39.13 26.93
Glaxo (NYSE:GSK) 53.39 54.23 0.615 4.54 66 % 60 % 1.57 2.73 -3.12 18.61 -10.74 0.00
JandJ (NYSE:JNJ) 91.59 92.81 0.660 2.84 45 % 42 % 1.33 2.05 -0.17 14.05 8.20 7.41
Lily (NYSE:LLY) 51.00 58.87 0.490 3.33 70 % 62 % 15.43 16.39 0.00 6.52 0.00 0.00
McKesson (NYSE:MCK) 161.40 180.81 0.240 0.53 12 % 9 % 12.03 12.03 -2.50 16.64 20.00 11.11
Medtronic (NYSE:MDT) 57.39 58.86 0.280 1.90 29 % 27 % 2.56 3.05 0.00 13.38 7.69 8.15
Merck (NYSE:MRK) 50.05 55.70 0.440 3.16 51 % 48 % 11.29 12.17 -1.15 6.55 2.33 5.26
Noradisk (NYSE:NVO) 36.95 45.55 0.159 1.40 33 % 30 % 23.27 23.27 39.42 14.56 0.00 25.05
Novartis (NYSE:NVS) 80.38 81.59 0.632 3.10 47 % 45 % 1.51 1.51 -2.01 5.62 0.00 2.51
Pfizer (NYSE:PFE) 30.63 31.23 0.260 3.33 46 % 44 % 1.96 2.74 0.00 11.45 8.33 10.00
Perrigo (NASDAQ:PRGO) 153.46 165.49 0.105 0.25 6 % 5 % 7.84 7.90 0.15 12.29 16.67 16.67
Roche (OTCQX:RHHBY) 70.20 72.54 0.505 2.79 48 % 45 % 3.33 3.33 -2.11 16.59 8.71 5.90
St. Jude (NYSE:STJ) 61.95 65.35 0.270 1.65 27 % 25 % 5.49 5.49 0.00 14.61 8.00 9.52
Stryker (NYSE:SYK) 75.14 80.27 0.305 1.52 25 % 23 % 6.83 7.23 0.00 39.96 15.09 23.15
Teva (NASDAQ:TEVA) 40.08 48.88 0.326 2.67 29 % 29 % 21.96 22.77 -1.31 8.85 5.16 17.21
Thermo (NYSE:TMO) 111.35 122.25 0.150 0.49 9 % 8 % 9.79 9.92 1.04 11.92 0.00 na
Zimmer (ZMH) 93.19 94.15 0.200 0.85 13 % 12 % 1.03 1.24 0.00 9.57 0.00 na
Zoetis (NYSE:ZTS) 32.69 29.42 0.072 0.99 19 % 17 % -10.00 -9.80 -5.56 18.25 11.54 na

Average         2.08 35 % 33 % 5.20 5.59 0.97 13.23 9.17 10.92

With the 10 Treasury at 2.69% and the sector average yield [on Q1 Divs] at 2.08% - the spread is -61 basis points.
The cap weighted ETF XLV is up 5.41% year to date - with dividends its total return is 5.41%.
* The change in the dividend is for the last twelve months and not year to date.

Click to enlarge

Dates used to credit dividends:

ABBV : 2-13-14 ABC : 02-13-14 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: 03-31-14 SYK: 01-30-14 TEVA: 12-02-13 TMO : 01-14-14 ZMH: 01-30-14
ZTS : 03-03-14
Click to enlarge

Earnings Growth & P/E Ratios 03-14

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 0 314 311 362 na -0.96% 16.40% 16.31 16.47 14.15 330 307 7.40%
ABC 167 219 251 276 314 369 430 13.77% 17.52% 16.53% 21.52 18.31 15.71 375 363 3.25%
ABT 0 0 0 174 201 220 247 15.52% 9.45% 12.27% 19.39 17.71 15.78 231 212 8.64%
AGN 0 0 0 414 477 547 622 15.22% 14.68% 13.71% 26.91 23.46 20.63 575 524 9.32%
AMGN 491 521 533 651 760 815 871 16.74% 7.24% 6.87% 16.12 15.04 14.07 864 776 10.80%
AZN 0 0 0 641 506 426 424 -21.06% -15.81% -0.47% 12.91 15.33 15.40 500 441 13.85%
BAX 380 398 431 453 467 513 550 3.09% 9.85% 7.21% 14.24 12.96 12.09 518 500 3.51%
BAYRY 0 0 0 688 745 827 938 8.28% 11.01% 13.42% 17.74 15.98 14.09 792 792 0.00%
BCR 509 560 640 657 578 819 917 -12.02% 41.70% 11.97% 25.07 17.69 15.80 828 720 13.19%
BDX 495 490 533 537 581 623 682 8.19% 7.23% 9.47% 19.85 18.52 16.91 652 618 5.46%
BMY 0 216 228 199 182 178 168 -8.54% -2.20% -5.62% 29.67 30.34 32.14 186 170 8.99%
COV 284 338 397 426 372 401 451 -12.68% 7.80% 12.47% 18.89 17.52 15.58 410 395 3.74%
GSK 0 0 0 353 373 373 407 5.67% 0.00% 9.12% 14.54 14.54 13.32 401 361 10.72%
JNJ 463 476 500 510 552 583 628 8.24% 5.62% 7.72% 16.81 15.92 14.78 602 579 3.95%
LLY 442 474 441 339 415 281 318 22.42% -32.29% 13.17% 14.19 20.95 18.51 288 275 4.63%
MCK 407 462 486 638 633 818 1069 -0.78% 29.23% 30.68% 28.56 22.10 16.91 885 811 9.05%

  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

MDT 292 322 337 346 375 382 409 8.38% 1.87% 7.07% 15.70 15.41 14.39 385 380 1.31%
MRK 325 342 377 382 349 344 370 -8.64% -1.43% 7.56% 15.96 16.19 15.05 375 307 19.77%
NVO 0 0 0 0 167 191 215 na 14.37% 12.57% 27.28 23.85 21.19 189 187 1.05%
NVS 0 0 0 0 501 537 557 na 7.19% 3.72% 16.29 15.19 14.65 570 521 9.12%
PFE 202 222 231 219 222 227 236 1.37% 2.25% 3.96% 14.07 13.76 13.23 232 220 5.29%
PRGO 0 293 401 499 561 663 803 12.42% 18.18% 21.12% 29.50 24.96 20.61 673 648 3.77%
RHHBY 0 274 279 325 384 418 454 18.15% 8.85% 8.61% 18.89 17.35 15.98 432 415 4.07%
STJ 234 301 328 239 376 398 430 57.32% 5.85% 8.04% 17.38 16.42 15.20 402 393 2.26%
SYK 295 333 372 407 423 483 527 3.93% 14.18% 9.11% 18.98 16.62 15.23 489 448 8.49%
TEVA 336 454 497 535 501 453 450 -6.36% -9.58% -0.66% 9.76 10.79 10.86 576 410 36.64%
TMO 0 0 416 494 542 681 784 9.72% 25.65% 15.12% 22.56 17.95 15.59 693 564 18.94%
ZMH 394 433 480 530 575 621 679 8.49% 8.00% 9.34% 16.37 15.16 13.87 630 583 7.57%
ZTS 0 0 0 108 142 153 175 31.48% 7.75% 14.38% 20.72 19.23 16.81 170 154 10.46%

BDC Average           7.63 7.35 10.17 19.18 17.78 16.16     8.97

Click to enlarge

The Predictive Power of the Dividend/EPS Ratio on Valuations

The following stocks had Q1-14 Dividend/EPS ratios of less than 25%: AGN, BCR, MCK, PRGO, TMO, ZMH and ZTS. Their YTD mean price gain = 6.35% and 5 of the 7 beat the sector mean yearly price gain [5.2%]. Their mean yield = 0.53% and they had an average price/earnings ratio = 20.08.

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 and TEVA. Their YTD mean price gain = 5.13% and 5 of the 12 beat the sector mean yearly price gain. Their mean yield = 1.81% - and they sold at an average price/earnings ratio = 16.59.

The following had Q1-14 Dividend/EPS ratios of more than 40% - but less than 50%: JNJ, NVS, PFE and RHHBY. Their YTD mean price gain = 2.03% and 0 of the 4 beat the sector mean yearly price gain. Their mean yield = 2.95% - and they sold at an average price/earnings ratio = 15.56.

The following companies had Q1-14 Dividend/EPS ratios of more than 50%: ABBV, AZN, BMY, GSK, LLY and MRK. Their YTD mean price gain = 6.14% and 3 of the 6 beat the sector mean yearly price gain. Their mean yield = 3.51% - and they sold at an average price/earnings ratio of 18.97.

In the stats above, you can see the pattern of the higher growth stocks - and those which reinvest a large portion of their earnings back into the company, having the lower yields and the higher P/E ratios. That pattern is broken in the last grouping. Why?

The first reason - BMY skews the results with a very high 30.34 P/e ratio. Second - There are more household names in this grouping. Everybody knows BMY, GSK, LLY and MRK. That probably has an influence on their valuations. Third - that valuations for this sector appear to be really messed up. I say that because the "yield + CAGRs" are really out of kilter for the well known names of Big Pharma. But even with these problems - one should still be able to see the pattern. Higher growth stocks strongly tend to have lower dividend to earning ratios; lower yields; and high price to earning ratios.