First look at AstraZeneca pharmaceutical looks promising

I read an article titled “7 Companies Paying Large Dividends That Are Fully Covered by Earnings” by The Manual of Ideas.  It mentioned a drug company named AstraZeneca which produces several billion dollar drugs.  I haven’t written much on pharmaceutical companies so I thought I’d take a first look at AstraZeneca (AZN).

Here is the excerpt from the article:

AstraZeneca (AZN) ($50 per share; MV $68 billion; EV $65 billion) is a major pharma firm that develops cardiovascular, gastrointestinal, infection, neuroscience, oncology and respiratory and inflammation medicines. It had ten drugs with annual sales of $1+ billion in 2010, including Crestor, Nexium, and Seroquel. Crestor sales rose 26% from $4.5 billion in 2009 to $5.7 billion in 2010, while total revenue increased 1% to $33.3 billion in the period. The Street expects AstraZeneca to earn $7.17 per share in 2011 (7x P/E), followed by $6.07 (8x) and $5.97 (8x) in subsequent years. The annualized dividend of $3.00 per share, an increase of 18% from a year ago, implies a yield of 6.0%. AstraZeneca has boosted the dividend six times in seven years, delivering an annualized growth rate of 18% for the period. AstraZeneca has a high-return business, with a seven-year average return on equity of 36%.

Here is the link to the original article

AstraZeneca (AZN)

Market price: $49.34

Shares: 1.37 billion

Market capitalization: $67.40 billion

Dividend record: AZN pays dividends twice a year usually in February and August.  The February dividend is usually 2-3 times larger than the August dividend.  Here is the last five years of dividend payments:

Date                  Dividend            Yield at that time

2/2/11              $1.85                3.88%

8/4/11              $0.70                1.33%

2/3/10              $1.71                3.97%

8/5/09              $0.59                1.26%

2/4/09              $1.50                3.92%

8/6/08              $0.55                1.11%

2/7/08              $1.35                3.55%

8/?/07              none?                None?

2/7/07              $1.23                2.16%

8/9/06              $0.49                0.81%

Dividend: $1.85 + at least $0.70 = $2.55 or greater

Dividend yield: 5.1% estimated

EPS (trailing twelve months): $5.72

Dividend payout ratio: 46% ($2.55/$5.72)

Earning power: $4.86 @ 1.37 billion shares

            EPS       Net inc.             Adj. EPS

2006     $3.85    $6,043 M           $4.41

2007     $3.73    $5,595 M           $4.08

2008     $4.20    $6,101 M           $4.45

2009     $5.19    $7,521 M           $5.49

2010     $5.57    $8,053 M           $4.86

Five year average EPS $4.86

Consider buying at or below $58.34 (below 12x average earnings)

Consider selling at or above $97.20 (above 20x average earnings)

Balance sheet: looks pretty strong


Book value per share: $15.60

Price to book value: 3.18 (so-so)

Current ratio: 1.47 (above 2.0 is good)

Quick ratio: 1.35 (above 1.0 is good)

Conclusion: high dividend stock with growth potential, $4.86 average earnings @ 1.37 billion share, good balance sheet.  This high dividend stock is value priced.  I haven’t read all the earning releases and annual reports.  I will investigate further.  This company could join Safe Bulkers (SB) on the best dividend stocks list.

Disclosure: I don’t own AstraZeneca (AZN).

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Published in: on July 12, 2011 at 9:10 pm  Leave a Comment  

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