Yield in the spreadsheet below is based on the Q3-15 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 as if they paid a quarterly dividend. AZN pays two unidentical dividends per year. I take the sum of those dividends and divide by four to get a run rate dividend per quarter. GILD's first dividend was in Q2-15. SNY was added when AGN was dropped. My sources did not agree on SNY's historical earnings data. The last four columns measure the percentage change in the 2015 EPS projection; the change in the price target since the beginning of the year; the change in the dividend since Q3-14; and the average yearly change in the dividend since Q3-12. BAX spun off its biopharmaceuticals business to form Baxalta (BXLT), while maintaining a 19.5% interest in BXLT. Each BAX share received one BXLT share. BXLT began trading on 7-01-15 at $32.88 while BAX went from a $69.93 close to a $37.55 open. This is treated as a 1.841 to one stock split - which would imply a $37.98 open. (All historical prices and EPS numbers were divided by 1.841) The dividend went from $0.52 to $0.28246. 2015 EPS went from $3.95 to $1.33 - to $1.29 on 7-31-15 (which still looks wrong compared to the $1.13 annual dividend - the prior div/EPS ratio was 53%) while BXLT began with a 2015 projection of $1.93 (still the same on 7-17). The 2016 EPS went from $4.06 to $1.48 while BXLT began at $1.97 - and it is now $2.01. BAX went from an unadjusted $4.90/share 2014 EPS to an adjusted $2.66. And that is still twice the 2015 projection. In summation, the BAX numbers are flakey. There may be future adjustments. That transaction may explain the lack of LTM dividend growth for BAX. AZN had a two for one stock split on 7-27-15 - and that change is not yet reflected in the data.
|Company and ticker||Price||/Quarter||Yield||EPS15||EPS16||Price||Pr+Div||EPS15||Target||Div 1yr||Div 3yr|
|Baxter International Inc.||(NYSE:BAX)||38.75||0.282||2.92||85.6%||79.6%||-2.66||-1.24||-48.44||-2.35||0.00||5.00|
|CR Bard Inc.||(NYSE:BCR)||197.47||0.240||0.49||10.6%||9.6%||18.52||18.91||-1.63||24.76||9.09||6.28|
|Becton, Dickinson and Company||(NYSE:BDX)||142.83||0.600||1.68||33.8%||28.5%||2.64||3.50||4.41||12.48||10.09||10.06|
|Bristol-Myers Squibb Company||(NYSE:BMY)||60.61||0.370||2.44||80.4%||66.1%||2.68||4.56||2.22||23.23||2.78||2.86|
|Cardinal Health, Inc.||(NYSE:CAH)||83.39||0.387||1.86||31.0%||26.9%||3.29||4.73||17.37||13.10||12.83||17.78|
|Gilead Sciences Inc.||(NASDAQ:GILD)||107.78||0.430||1.60||14.7%||14.8%||14.34||14.80||18.32||3.26||0.00||na|
|Johnson & Johnson||(NYSE:JNJ)||95.17||0.750||3.15||48.6%||46.9%||-8.99||-7.55||0.00||0.74||7.14||7.13|
|Eli Lilly and Company||(NYSE:LLY)||83.19||0.500||2.40||61.0%||55.9%||20.58||22.03||2.18||32.85||2.04||0.68|
|Merck & Co. Inc.||(NYSE:MRK)||55.37||0.450||3.25||51.3%||47.1%||-2.50||-0.12||-0.85||2.14||2.27||2.33|
|Novo Nordisk A/S||(NYSE:NVO)||55.73||0.190||1.36||37.6%||33.2%||31.69||32.59||3.59||42.69||-8.43||16.49|
|Perrigo Company PLC||(NYSE:PRGO)||185.42||0.125||0.27||6.5%||5.6%||10.92||11.07||5.30||16.73||19.05||16.07|
|Roche Holding AG||(OTCQX:RHHBY)||34.16||0.271||3.17||59.2%||54.5%||-9.44||-6.56||-14.49||-3.98||-1.28||5.37|
|St. Jude Medical Inc.||(NYSE:STJ)||72.62||0.290||1.60||29.1%||26.8%||11.67||13.01||-5.24||13.60||7.41||8.03|
|Teva Pharmaceutical Industries||(NYSE:TEVA)||65.03||0.340||2.09||25.3%||25.6%||13.08||14.26||5.08||24.53||-3.68||11.75|
|Thermo Fisher Scientific, Inc||(NYSE:TMO)||125.52||0.150||0.48||8.1%||7.3%||0.18||0.54||-4.40||9.28||0.00||5.13|
|Zimmer Biomet Holdings, Inc.||(NYSE:ZBH)||104.37||0.220||0.84||13.1%||11.3%||-7.98||-7.40||5.16||2.53||0.00||7.04|
|With the 10 Treasury at 2.18% and the sector average yield [on Q3 Divs] at 2.11% - the spread is -7 basis points.|
|The cap weighted ETF XLV is up 5.00% year to date - with dividends included, its total return is 5.31%.|
|The yield on the XLV is 1.29% using the sum of LTM dividends - while LTM dividend growth is 8.19%.|
Differences between my coverage universe and the XLV My coverage includes BAYRY, GSK, NVO, NVS, RHHBY and SNY - and those non-US companies are not in the XLV. The XLV includes significant weightings in non-dividend paying CELG and BIIB. It has minor weightings in REGN, VRTX, MYL, BSX, ISRG, EW, MNK, LH and WAT. Stats for these are provided below. For this grouping a dividend CAGR is meaningless. I show the last two end of quarter Yahoo projections of five year EPS growth in the two columns on the right.
|12-31-14||8-28||YTD Change||Earnings Per Share||P/E Ratios||Yahoo CAGR|
|Company and ticker||Price||Price||Price||EPS||Target||2013||2014||2015||2016||2014||2015||2016||Q4-14||Q1-15||Q2-15|
|Biogen Idec Inc.||(NASDAQ:BIIB)||342.40||303.69||-11.31||-2.27||2.80||896||1383||1592||1778||21.96||19.08||17.08||21.20||17.64||16.84|
|Boston Scientific Corporation||(NYSE:BSX)||13.17||17.07||29.61||2.25||3.43||46||84||91||106||20.32||18.76||16.10||10.53||9.87||11.09|
|Gilead Sciences Inc.||93.79||107.78||14.92||18.32||3.26||204||809||1169||1164||13.32||9.22||9.26||23.96||13.22||20.60|
|Intuitive Surgical, Inc.||(NASDAQ:ISRG)||531.24||514.24||-3.20||-4.14||9.38||1673||1610||1735||1982||31.94||29.64||25.95||3.50||3.58||12.70|
|Laboratory Corp. of America||(NYSE:LH)||108.25||119.61||10.49||7.79||27.57||695||680||789||879||17.59||15.16||13.61||8.75||9.90||11.08|
The Predictive Power of the Dividend/EPS Ratio on Valuations: Dividend to EPS ratios range from as low as the single digits 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 stocks that did not pay dividends had a YTD mean price gain = 7.73%. They had an average price/earnings ratio = 21.86. They had an average Yahoo CAGR projection of 18.62.
In this sector, there are growth companies that have not been dividend growth companies. Having dividend/EPS ratios under 25% is a key indicator of irregular dividend growth. The following stocks had Q2-15 Dividend/EPS ratios of less than 25%: A, ABC, BCR, GILD, MCK, PRGO, TMO, ZBH and ZTS. Their YTD mean price gain = 4.46% and 5 of the 9 beat the sector mean yearly price gain [3.34%]. Their mean yield = 0.80% and they had an average price/earnings ratio = 19.17. Their mean LTM dividend growth = 9.77% and they had an average CAGR projection of 9.39.
The following had Q2-15 Dividend/EPS ratios of more than 25% - but less than 40%: AMGN, BAYRY, BDX, CAH, DGX, MDT, NVO, STJ, SYK and TEVA. Their YTD mean price gain = 6.13% and 4 of the 10 beat the sector mean yearly price gain. Their mean yield = 1.81% - and they sold at an average price/earnings ratio = 17.88. Their mean LTM dividend growth = 8.90% and they had an average CAGR projection of 7.71.
The following had Q2-15 Dividend/EPS ratios of more than 40% - but less than 50%: ABBV, ABT and JNJ. Their YTD mean price gain = -3.00% and 0 of the 3 beat the sector mean yearly price gain. Their mean yield = 2.81% - and they sold at an average price/earnings ratio = 17.22. Their mean LTM dividend growth = 12.55% and they had an average CAGR projection of 7.40.
The following companies had Q2-15 Dividend/EPS ratios of more than 50%: AZN, BAX, BMY, GSK, LLY, MRK, NVS, PFE, RHHBY and SNY. Their YTD mean price gain = 1.42% and 4 of the 10 beat the sector mean yearly price gain. Their mean yield = 3.39% - and they sold at an average price/earnings ratio of 20.56. Their mean LTM dividend growth = -0.74% and they had an average CAGR projection of 4.72.
The Predictive Power of subsector on Valuations: There is a huge difference in the type of products or services that this universe produces. Could that difference account for differences in performance and valuation?
The following stocks were in the Distribution sub-sector: ABC, CAH and MCK. Their YTD mean price gain = 3.97% and 1 of the 3 beat the sector mean yearly price gain [3.34%]. Their mean yield = 1.19% and they had an average price/earnings ratio = 17.58. Their mean LTM dividend growth = 17.63% and they had an average CAGR projection of 11.00.
The following stocks were in the Medical devices sub-sector: BAX, BCR, BDX, MDT, STJ, SYK and ZBH. Their YTD mean price gain = 4.15% and 3 of the 7 beat the sector mean yearly price gain [3.34%]. Their mean yield = 1.57% and they had an average price/earnings ratio = 20.18. Their mean LTM dividend growth = 9.18% and they had an average CAGR projection of 7.11.
The following stocks were in the Pharmaceutical sub-sector: ABBV, AMGN, AZN, BAYRY, BMY, GSK, JNJ, LLY, MRK, NVO, NVS, PFE, RHHBY, SNY, TEVA and ZTS. Their YTD mean price gain = 2.89% and 7 of the 16 beat the sector mean yearly price gain [3.34%]. Their mean yield = 2.84% and they had an average price/earnings ratio = 19.20. Their mean LTM dividend growth = 2.55% and they had an average CAGR projection of 5.90.
The following stocks were in the Diagnostic sub-sector: A, DGX and TMO. Their YTD mean price gain = -2.64% and 0 of the 3 beat the sector mean yearly price gain [3.34%]. Their mean yield = 1.26% and they had an average price/earnings ratio = 17.65. Their mean LTM dividend growth = 7.03% and they had an average CAGR projection of 7.33.Earnings Growth & P/E Ratios 8-28
Fiscal and calendar years are not in sync. ABC, BDX, CAH, MCK, MDT and PRGO began fiscal 2015 at least one quarter earlier than calendar 2015. Several stocks sell at valuations based on their drug pipelines - and short-term growth in EPS fails to capture a growth picture which is expected to come in 2016 and beyond. BMY is a good example. 2017 EPS projection along with the 2016 projections for GSK and NVO are from NASDAQ. The rest of the projections are from Yahoo Finance.
|Earnings / Share||Earn. Growth||P/E Ratios||15 EPS Range|
|Earnings / Share||Earn. Growth||P/E Ratios||15 EPS Range|
Disclosure: I am/we are long ABC, ABT, AMGN, GILD, NVO, STJ, SYK.