Big Pharma Rules 'Safer' Dividend Healthcare Top Gains Per Broker Targets To January

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Includes: ABBV, AMGN, ANSLY, BIOGY, CSWYY, JNJ, KND, LLY, MDT, NHC, NRC, PFE, RHHBF, RHHBY, SNY, SNYNF
by: Fredrik Arnold
Summary

Sanofi, the top "safer" dividend healthcare stock's 13.34% net gain, was 40% over Lilly's 9.26% second place effort, and 80% beyond Medtronic's third place gains per analysts' targets 1/25/18.

42 of 83 healthcare sector stocks were deemed safer because they showed positive one-year returns, and free cash flow yields greater than their dividend yields.

Top 10 "safer" dividend healthcare sector annual yields ranged 3.01%-5.05% from CSWYY; RHHBF; RHHVF; RHHBY; BIOGY; SNY; SNYNF; PFE; NRCIB; KND. Free cash flow yields ranged 4.92%-9.36%.

Besides safety margin, healthcare stocks also reported payout ratios (lower is better), total annual returns, dividend growth, and p/e ratios as of 1/25/18 to further document their financial upside. Positive total returns narrowed the list of 83 to 66.

Analyst one-year targets fingered ten highest yield "safer" dividend healthcare sector stocks netting 46.9% less gain from $5k invested in the lowest priced five than from $5K invested in all ten. Big high price dogs ruled January's "safer" dividend healthcare sector.

Actionable Conclusions (1-10): Brokers Calculated Top Ten Healthcare "Safer" Dividend Stocks to Net 1.64% to 13.34% Gains To January, 2019

Four of ten top 'safer' dividend Healthcare dogs by yield (shaded in the chart above) were verified as being among the top ten gainers for the coming year. Thus, based on analyst 1 year target prices, the dog strategy for this Health group graded out as 40% accurate for January.

Projections based on estimated increases in dividend amounts from $1000 invested in the ten highest yielding stocks and aggregate one year analyst mean target prices as reported by YCharts created the 2019 data points. Note: one year target prices from one analyst were not applied (n/a).Ten probable profit-generating trades to 2019 were:

Sanofi (SNY) netted $133.38 based on estimates from five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.

Eli Lilly (LLY) netted $92.57 based on median target price estimates from twenty-five analysts, just projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 66% less than the market as a whole.

Medtronic (MDT) netted $58.55 based on a median target from twenty-six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 1% above the market as a whole.

Pfizer (PFE) netted $56.01 based on dividends plus median target price estimate from twenty-five analysts less broker fees. The Beta number showed this estimate subject to volatility 3% over the market as a whole.

Ansell (OTCPK:ANSLY) netted $35.87 based on a median target price estimate from twelve analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 44% less than the market as a whole.

Johnson & Johnson (JNJ) netted $30.97 based on estimates from twenty-five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.

National Research (NRCIB) netted $21.83 based on just dividends less broker fees. The Beta number showed this estimate subject to volatility 99% less than the market as a whole.

Novartis (NHC) netted $19.16 based on estimates from six analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 25% less than the market as a whole.

Sanofi (OTCPK:SNYNF) netted $16.51, based on just dividends less broker fees. The Beta number showed this estimate subject to volatility 13% less than the market as a whole

Amgen (AMGN) netted $16.35 based on estimates from twenty-seven analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 38% over the market as a whole.

Average net gain in dividend and price was 4.8% on $10k invested as $1k in each of these ten Healthcare "safer" dividend dog stocks. This gain estimate was subject to average volatility 23% less than the market as a whole.

Actionable Conclusion (11): (Bear Alert) Analysts Anticipated One 'Safer' Dividend Healthcare Stock To Lose 5.1% By January, 2019

The probable losing trade revealed by YCharts for 2019 was:

AbbVie (ABBV) projected a $51.02 loss based on dividend plus a median target price estimate from thirteen analysts including $20 of broker fees. The Beta number showed this estimate subject to volatility 55% more than the market as a whole.

The Dividend Dogs Rule

The "dog" moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as "dogs." More specifically, these are, in fact, best called "underdogs".

Which Industries Have 'Safer' Dividend Representatives In The Healthcare Sector?

Eight of ten healthcare industries composing the sector, were represented by the 42 firms whose stocks showed margins of cash to cover dividends by this screen as of January 25.

The industry representation broke out as follows: Long-Term Care Facilities (2); Diagnostics & Research (2); Drug Manufacturers - Major (16); Drug Manufacturers - Specialty & Generic (5); Biotechnology (5); Medical Instruments & Supplies (2); Medical Care (3); Medical Devices (6); Healthcare Plans (0); Medical Distribution (0).

The first four industries listed above populated the top ten of the healthcare 'safe' sector by yield.

42 of 83 Healthcare Firms Offer "Safer" Dividends

Periodic Safety Inspection

A previous article discussed the attributes of the 50 Top yield Healthcare stocks culled from this master list of 83.

You see grouped below the green tinted list of 42 that passed the Healthcare dog "safer" check with positive past-year returns and cash flow yield sufficient to cover their anticipated annual dividend yield. The margin of cash excess is shown in the bold face "Safety Margin" column.

Financial outcomes, however, are easily jiggered by boards of directors tinkering with company policies cancelling or varying the payout of dividends to shareholders. For example, Pfizer (NYSE:PFE) on the list below cut their dividend in half in 2009, due to economic conditions, despite strong cash flow. It took Kindred Healthcare (KND) from 2004 until 2013 to instate a dividend to shareholders which has not increased since.

Three additional columns of financial data, listed after the Safety Margin figures above, reveal payout ratios (lower is better), total annual returns, dividend growth, and p/e ratio levels for each stock. This data is provided to reach beyond yield to select reliable payout stocks.

Limiting candidates to only those with positive total annual returns, for example, narrowed the 83 on this list to 66 for this article. Positive results in all five columns after the dividend ratio is remarkable as a solid financial signal.

To quantify top rankings, analyst mean price target estimates provide a "market sentiment" gauge of upside potential. Added to the simple high yield metric, analyst mean price target estimates became another tool to dig out bargains.

Yield Metrics Revealed No Bargains From 5 Lowest Priced Top 10 Yielding "Safer" Dividend Healthcare Stocks

Ten "Safe" dividend Healthcare firms with the biggest yields January 25 per YCharts data ranked themselves by yield as follows:

ActionableConclusions: Analysts Predicted 5 Lowest Priced, of 10 "Safer" Dividend High Yield Healthcare Sector Dogs, Will (11) Deliver 1.43% VS. (12) 2.70% Net Gains from All Ten by January, 2019

$5000 invested as $1k in each of the five lowest priced stocks in the ten "safer" dividend Healthcare Sector pack by yield were determined by analyst 1 year targets to deliver 46.9% LESS gain than $5,000 invested as $.5k in all ten. The sixth lowest priced "safer" dividend Healthcare dog, Sanofi (SNY) showed the best net gain of 13.34% per analyst targets.

Lowest priced five "safer" dividend Healthcare dogs as of January 25 were: Kindred Healthcare (KND); BioGaia (OTCPK:BIOGY); China Shineway (OTCPK:CSWYY); Roche Holding (OTCQX:RHHBY); Pfizer (PFE), with prices ranging from $9.50 to $37.23.

Higher priced five "safer" dividend Healthcare dogs as of January 25 were: Sanofi (SNY); National Research (NRCIB); Sanofi (OTCPK:SNYNF); Roche Holding (OTCPK:RHHVF); Roche Holding (OTCQX:RHHBF), with prices ranging from $44.99 to $248.65. This month, the big high cost 'safer' dividend Big Phrama Healthcare stocks ruled this kennel.

This distinction between five low priced dividend stocks and the general field of ten reflects the "basic method" Michael B. O'Higgins employed for beating the Dow. The added scale of projected gains based on analyst targets contributed a unique element of "market sentiment" gauging upside potential. It provided a here and now equivalent of waiting a year to find out what might happen in the market. Its also the work analysts got paid big bucks to do.

Caution is advised, however, as analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.

The net gain estimates mentioned above did not factor-in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.

See my instablog for specific instructions about how to best apply the dividend dog data featured in this article, this glossary instablog to interpret my abbreviated headings, and this instablog to aid your safe investing. --Fredrik Arnold

Stocks listed above were suggested only as possible starting points for your safest "Safer" Healthcare dog dividend stock research process. These were not recommendations.

Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.ycharts. com; www.finance.yahoo.com; analyst mean target price by Thomson/First Call in YahooFinance. Dog photo: dogtrainingbasics.com

Disclosure: I am/we are long MFCSF, PFE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.