The drug sector has become rather boring and investors already know all about the ongoing patent expiration threats that loom in the industry. The good news is that the drug sector does still offer a very defensive profile for investors worried about the stock market in general and there are plenty of high-yield dividends to boot. Eli Lilly & Co. (NYSE: LLY) reported earnings this morning and we wanted to see how its dividend payments match up to larger rivals of Pfizer Inc. (NYSE: PFE) and Merck & Co. Inc. (NYSE: MRK).
Eli Lilly & Co. (NYSE: LLY) is down 1.6% around $35.45 after earnings today and its 52-week trading range is $32.02 to $38.08. So the shares are almost exactly wedged in the middle of its 52-week trading range. Now sees a $4.15 to $4.30, a drop of 9% to 12% in non-GAAP terms. More importantly, Lilly said that it sees cash flows being ample to fund capital expenditures of $800 to $900 million. It also said that cash flow is enough to fund business development and for the company’s dividend. We have now seen two years of $0.49 per quarter and the current dividend yield is roughly 5.5%.
Pfizer Inc. (NYSE: PFE) is down 1% at $20.32 today and its 52-week range is $14.00 to $20.75. Pfizer pays a 3.9% dividend yield currently. Merck & Co. Inc. (NYSE: MRK) is down 1.5% at $34.00 against a 52-week range of $30.70 to $37.68 and it currently pays a 4.4% dividend yield.
For those willing to take on the currency risks and variable dividend risks of ADRs, there are also Astrazeneca PLC (NYSE: AZN) and GlaxoSmithKline PLC (NYSE: GSK) which were in our top ADRs dividend review last week. Those are closer to 5% payouts.
Investors have had to learn to cope with more problems than positives in the drug sector. Growth is virtually gone and many face generic competition in the coming years on their key blockbuster drugs. It is also possible that any new health care concessions after the next election will have to involve even more ‘sharing’ from the drug companies. The good news is that there are still high dividends to boot and these annual payouts look very manageable for the companies even without real earnings growth.
JON C. OGG