Long-term treasury bonds are ridiculously expensive. It may be OK to buy them now and sell them at a small premium to Federal Reserve but we don’t think it is a good idea to invest them for the long-term. High dividend yielding stocks are much better alternatives despite the higher volatility. The demand for healthcare and pharmaceuticals will probably be there in 30 years. So, we think investors should consider investing in the following 7 cheap drug companies with solid dividends:
1. Eli Lilly & Co. (LLY) is trading at $38.23, near its 52-week high of $39.78. LLY is a strong buy. It is priced at 8.96 times its earning and has an EPS of 4.25. It is a $42.45B market cap company and offers a dividend yield of 5.10%. LLY is a favorite pick of Jim Simons’ Renaissance Technologies. The fund has a position worth more than $387 million in the company after increasing its stake by 59% in the second quarter.
2. Bristol-Myers Squibb Company (BMY) recently traded at $32.31 a share, near its 52-week high of $33.20 a share. It has a $55.16B market cap and carries a 4.10% dividend yield. BMY has a 16.77 P/E ratio and an EPS of 1.93. Jim Simons also likes BMY. He increased his fund’s position in the company by 53% in the second quarter, bring its total position to a value over $207 million. Of the funds we track, the next most bullish fund manager is Samuel Isaly. His Orbimed Advisors has a $142 million position in BMY (see Samuel Isaly’s favorite stocks).
3. AstraZeneca PLC (AZN) is trading at $46.66 a share. Analysts forecast the stock will reach $51.55 within the next 12 months. This $63.74B market cap company is trading at 8.07 times its earnings and has an EPS of 5.78. Jim Simons is bullish on this stock too. He has almost $28 million invested in the company, and he isn’t alone. David Dreman’s Dreman Value Management fund has more than $23.2 million invested in AZN (see more of David Dreman’s top picks).
4. Sanofi-Aventis (SNY) recently traded at $34.53. It is expected to increase to $44.22 a share within the next year. As an added bonus, SNY offers a 3.70% dividend yield. The $92.69B market cap company has a P/E ratio of 15.27 and an EPS of 2.26. Ken Fisher of Fisher Asset Management is extremely bullish on this stock. His fund holds a stake worth more than $592.5 million in the company, totaling around 1.5% of the Fisher Asset Management portfolio (check out more of Ken Fisher’s favorite stocks).
5. Merck & Co. Inc. (MRK) offers a 4.60% dividend yield. The $100.34B market cap company recently traded at $32.57. Analysts expect the stock to rise to $39.60 within the next 12 months. It has a 35.10 P/E ratio and a 0.93 EPS. Ric Hill’s Diamond Hill Capital fund has more than 2% of its portfolio invested in MRK. Its position is currently valued at $172.8 million (read about Ric Dillon’s other top picks).
6. GlaxoSmithKline plc (GSK) is trading at $43.12 a share. Analysts predict the stock will hit $50.58 within the next 12 months. The $110.17B market cap company offers a 4.80% dividend yield. It has a P/E ratio of 21.67 and an EPS of 1.99. Several big names are bullish on this stock. Ken Fisher has a stake worth more than $500 million in GSK after increasing his fund’s position in the company by 134% in the second quarter. David Dreman is also bullish on GSK, as is Berkshire Hathaway’s Warren Buffett. His fund has $64.8 million invested in the company (see Warren Buffett’s favorite positions).
7. Pfizer Inc. (PFE) recently traded at $18.81 a share. It offers a 4.20% dividend yield and is expected to top $23.28 a share within a year. PFE has a $146.77B market cap. It is trading at 17.56 times its earning and has an EPS of 1.07. PFE is a top pick for David Einhorn. The notoriously savvy fund manager, famous for his predictions, has more than 10% of his Greenlight Capital fund invested in PFE (see David Einhorn’s top picks).