When it comes to dividend income, there are few industries more sought
after than pharmaceutical stocks. More specifically, investors tend to focus on
the 10 largest companies by market cap in pharmaceuticals because they're likely
to have established product portfolios, deep drug development pipelines, and
significant cash flow that allows them to pay dividends regularly higher than
the S&P 500 average of 2%.
In fact, of the 10 largest companies by market cap in pharmaceuticals,
there isn't one with a dividend yield lower than 2.2%, and the combined
operating cash flow of these 10 companies over the trailing-12-month period
equaled -- get ready for this -- $91.3 billion!
The biggest pharmaceuticals by market cap
The 10 largest companies by market cap in pharmaceuticals are:
Company
|
Market
Value
|
Dividend
Yield
|
Johnson & Johnson (NYSE: JNJ )
|
$279
billion
|
2.7%
|
Novartis
|
$240.8
billion
|
2.8%
|
Pfizer (NYSE: PFE )
|
$211.6
billion
|
3.3%
|
Merck (NYSE: MRK )
|
$163.9
billion
|
3.1%
|
Sanofi
|
$130.7
billion
|
3.3%
|
GlaxoSmithKline (NYSE: GSK )
|
$113.1
billion
|
5.7%
|
Bristol-Myers Squibb
|
$108.5
billion
|
2.2%
|
AbbVie
|
$91.9
billion
|
3.4%
|
AstraZeneca
|
$88.5
billion
|
5.5%
|
Eli Lilly (NYSE: LLY )
|
$78
billion
|
2.6%
|
Source: Yahoo! Finance.
The result of this exorbitant cash flow is ample benefits for shareholders.
As you can tell above, pharmaceuticals give investors significant dividend
income, which can potentially be supercharged by reinvesting your dividend
right back into more shares of pharmaceutical stocks.
In addition to healthy dividends, the pharmaceutical sector is known for
big share buybacks. Share repurchases help lower the number of shares
outstanding and can have a beneficial effect on a company's earnings per share,
or EPS. If a company's EPS is boosted by fewer shares outstanding, it could
make the company appear cheaper on a valuation or comparative basis and lead to
its share price rising.