These Five Income Stocks Will Gain From Sterling Weakness: GlaxoSmithKline plc (ADR) (GSK), AstraZeneca plc (ADR) (AZN)

Page 1 of 2

LONDON — So far this year, the pound has fallen more than 7% against the dollar, and it’s now trading at its lowest level since July 2010.

It looks likely to get worse before it gets better, with fears of a triple-dip recession, the loss of the AAA rating, fudged coalition politics, Mervyn King voting for more QE, and an even more inflation-tolerant Bank of England Governor waiting in the wings.

GlaxoSmithKline plc (ADR) (NYSE:GSK)Dividends
With 70% of FTSE 100 company earnings coming from overseas, a weak pound can be a boost for the index. It should also be good news for dividends.

Brokers Shore Capital estimate that dividend growth in the FTSE 350 could double if sterling continues to fall against the dollar. Some of the big beneficiaries are the miners, which I looked at last week. But they start from a low base yield.

So I’ve trawled the FTSE’s top 20 highest-yield stocks to screen for those with substantial overseas earnings, especially U.S.-based. With the euro looking at least as vulnerable as the pound, I’ve screened out companies with high European earnings.

These are the five high-income stocks, all with prospective yields of more than 4.5%, which should benefit most from sterling’s woes:

1. BAE Systems plc (LON:BA)
The U.S. is by far the most important market for BAE Systems , accounting for nearly half its revenues. The U.K. contributes a fifth, and my guess is that much of BAE’s other revenues are dollar denominated.

The imminent impact of sequestration is a threat to BAE’s U.S. sales, but, ultimately, I don’t believe the U.S. will allow its national defense to be compromised. So I see BAE as a good long-term buy, with a prospective yield of 5.8%.

2. GlaxoSmithKline plc (ADR) (NYSE:GSK)
GlaxoSmithKline plc (ADR) (NYSE:GSK)’s response to the patent cliff — moving into over-the-counter medicines and emerging markets — shows up in its revenue split. Just 6% of sales are in the U.K., with the U.S. contributing a third of the total.

Pharmaceutical shares demonstrated their defensive mettle in the 2007/2008 crash, losing just 15% as the FTSE halved. With a broad spread of revenues, a growing emerging markets franchise, and a yield of 5.3%, GSK is all things to all men. Why wouldn’t you own it?

3. AstraZeneca plc (ADR) (NYSE:AZN)
AstraZeneca plc (ADR) (NYSE:AZN) gets nearly 40% of its revenues from the Americas, with a quarter each from the U.K. and continental Europe. At 6%, it has one of the FTSE’s highest yields, with fears over the company’s patent cliff weighing on the shares. Already, it’s seeing declining revenues.

New CEO Pascal Soriot should update investors with his strategy this month. That seems aimed at repositioning Astra back to scientific innovation, with maybe some biotech acquisitions or joint ventures. It would be a markedly different strategy from rival GSK.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!