 |
| Dow | Nasdaq | About Us | Disclaimer |  |
RSS Feed |  |
Follow us on Twitter |
|
Featured Advisors |
Tuesday February 16, 2010
Healthy outlook for Bristol-Myers
By Roger Conrad, editor Personal Finance
The upshot: It’s time for income investors to come back to what’s historically been a mainstay of diversified portfolios: big pharmaceutical companies. We’re adding one of the sector’s most durable members to the Income Portfolio, Bristol-Myers Squibb (NYSE: BMY). 
The stock has been a lackluster performer since the 1990s, when it was last a Portfolio recommendation. The company’s underlying business, however, has become ever-more valuable. For starters, the current yield of more than 5 percent is back on the rise after a 3.2 percent boost with the February payment. The lowest Wall Street estimate for 2010 earnings would still cover the payout by a 1.67-to-1 margin. Moreover, profits are expected to rise nearly 10 percent a year for at least the next five years. The balance sheet is solid; Standard & Poor’s and Fitch rate Bristol-Myers A+ (stable), while Moody’s gives it an A2 (stable). Debt maturing in 2038 has a yield-to-maturity of just 5.437 percent, a premium of barely 100 basis points to equivalent US Treasuries. In December, Bristol-Myers made its biggest strategic move in decades, spinning out all of its non-pharmaceutical operations as Mead Johnson Nutritional (NYSE: MJN). That’s left it a pure pharma play with a full product pipeline for the next several years and $10 billion in the bank. Management has consistently demonstrated its ability to win regulatory approvals globally, rolling out 10 blockbuster products in the last seven years, most recently a treatment for diabetes. It has five additional medicines on track to launch by the end of 2012, a string of research partnerships developing a range of other potential blockbusters and a major investment in developing the “drugable therapeutic target pool” to expand the limits of pharmaceutical development. Over the long haul, research and development will drive the value of this company, and the potential is explosive. Meanwhile, the generous dividend and valuation of less than 11 times projected 2010 earnings lowers risks for new buyers. Buy Income Portfolio addition Bristol-Myers Squibb up to 26. Learn more about this financial newsletter at Personal Finance. |
News Flash
|
|
Republican Scott Brown’s victory in the Massachusetts race for the US Senate still leaves Democrats in firm control of the federal government. But it dramatically alters the politics of health care legislation for the foreseeable future.