3 High-Dividend Pharmaceutical Stocks to Buy
NEW YORK (TheStreet ) — With Eli Lilly Co. (LLY ) experimenting with a new drug for Alzheimer’s disease, we decided to check Quant Ratings for pharmaceutical stocks to buy. The companies we chose also pay high dividends.
Eli Lilly taking a risk on this new drug is nothing new to the industry. The sector is full of risks: Drugs in development might flop; the FDA might not approve them, and even if they are approved, there’s a chance those drugs won’t sell.
That said, there are benefits from investing in pharmaceutical stocks. The companies are protected by patents, and those patents allow them to recoup their research and development investments, and then some, should they produce a popular drug.
The industry also has many mergers and acquisitions. which can be profitable for investors. Pharmaceutical company deals are motivated by the desire to beef up the new drug pipeline and streamline heavy research costs.
So, what are the best pharmaceutical stocks investors should be buying? Here are the top three, according to TheStreet Ratings ,TheStreet ‘s proprietary ratings tool.
TheStreet Ratings projects a stock’s total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which companies made the list. And when you’re done, be sure to read about which exchanges to buy now. Year-to-date returns are based on July 20, 2015, closing prices. The highest-rated stock appears last.
Pfizer Inc. a biopharmaceutical company, discovers, develops, manufactures, and sells healthcare products worldwide.
“We rate PFIZER INC (PFE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, expanding profit margins and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.”
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The stock has not only risen over the past year, it has done so at a faster pace than the S P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The current debt-to-equity ratio, 0.53, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, PFE has a quick ratio of 1.81, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for PFIZER INC is currently very high, coming in at 86.14%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PFE’s net profit margin of 21.87% significantly trails the industry average.
- PFIZER INC has improved earnings per share by 8.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, PFIZER INC reported lower earnings of $1.42 versus $1.65 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $1.42).
- You can view the full analysis from the report here: PFE Ratings Report