The healthcare sector has been one of the best sectors for dividend hunters — most of the companies operating in the sector generate massive cash flow and payout a large chunk in dividends. Despite tight regulations and hefty investment in new technologies, these companies have been able to generate impressive growth figures.
Emerging market growth
The business model for GlaxoSmithKline plc (ADR) (NYSE:GSK) focuses on growth, risk management, and improved financials. The company has three broad segments: Pharmaceuticals, Vaccines, and Consumer Healthcare — these segments are interlinked, resulting in cost synergies. The Pharmaceutical segment is the biggest contributor to total revenue, followed by consumer healthcare and vaccines.
At the moment, the main growth regions are emerging markets. All the big players are turning their focus towards capturing these high-growth markets. The company has already expanded its efforts in these markets and sales from these areas reached 26% of total global sales during 2012. Furthermore, the company has managed to introduce 23 patent-protected medicines in the U.S.A. and Europe over the last five years.
Consistent dividend payments have been one of the most important characteristics of GlaxoSmithKline plc (ADR) (NYSE:GSK). At the moment, the company pays an annual dividend of $2.20, yielding over 4.20%. A look at the trend in dividend payments indicates that the company has been consistently increasing dividends over the last five years. In addition, cash flows have been solid and growing sales from emerging markets will allow the company to maintain its current dividends.
Pursuing aggressive growth
As I mentioned above, the emerging markets are the most attractive at the moment. AstraZeneca plc (ADR) (NYSE:AZN) has the strong presence in emerging markets, especially in China and India. The company has around 5-7 projects in the phase III stage, which will be completed by 2014. AstraZeneca plc (ADR) (NYSE:AZN) has also acquired Pearl Therapeutics, which should further strengthen its product portfolio.
The company is following an aggressive growth strategy and it is one of the suitors for Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX). Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) is valued at around $9.5 billion, and the company is one of the most important players in the $61 billion global cancer medicines market. If the company acquires Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), its product portfolio will expand significantly, which will ensure future growth.