St. Jude Medical, Inc. (NYSE:STJ) happens to be the cheapest of the five stocks on a price to forward earnings basis, trading at 11 times, as well as boasting the highest dividend yield of 2.4%. What’s more is that St. Jude has managed to grow its dividend payment by an annualized 84% over the last five years. St. Jude is a cheap dividend stock worth investigating, with a PEG below 2.0 and a dividend payout ratio less than 60%.
St. Jude will also see interim pressures related to a weak CRM market, not to mention weakness in Europe; however, new products and a solid presence in the defibrillator segment should help the company mitigate the aforementioned weaknesses.
Abbott Laboratories (NYSE:ABT) has an impressively low beta, five year average of 0.2. This is in part due to its vast portfolio of science-based health care products and geographical footprint; 30% of revenues are generated in the United States, 30% in Western Europe, Canada, Japan and Australia, and 40% in India, China, Russia and Brazil–quite a diversified geographical footprint.
The company’s new products, including Xience Expedition stent, absorbable stent and MitraClip mitral valve repair system should be key growth drivers going forward, while emerging market expansion will help drive sales of generic drugs.
Abbott has some very impressive hedge fund interest, with 50 hedge funds long the stock at the end of 2012; most notably, the top hedge fund owner was Mason Hawkins’s Southeastern Asset Management with a $456 million position that made up 2% of its total 13F portfolio (check out Hawkins’ favorite stock picks).
By the Numbers
Although on a price to forward earnings basis, Boston is the most expensive of the five, trading at 17 times, on a price to sales basis it’s one of the cheapest. Boston trades at 1.5 times sales, compared to Medtronic at 2.9 times, St. Jude 2.4 times, Abbott 1.4 times and C.R. Bard 2.8 times. Boston also has the lowest debt ratio of the five stocks at only 25%, compared to Medtronic’s 33%, St. Jude’s 33%, Abbott’s 31% and C.R. Bard’s 34%.
Don’t Be Fooled
Boston is still a turnaround play, having seen various pressures related to divestitures and its core markets. However, it appears to be making steps in the right direction for a turnaround. Its key initiatives to keep an eye on include acceleration of sales growth via new products across non-core business segments, expanding into adjacent product markets (which it has already initiated via key acquisitions) and penetration of emerging markets. This grand plan is expected to take place over the long-term, with a three to five year outlook.
The article Buying the Boston Boom originally appeared on Fool.com and is written by Marshall Hargrave.
