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This Stocks offers a 4% Yield and 13% Upside

AbbVie (ABBV) is a global research-based pharmaceuticals business that emerged as a separate entity following its spin-off from Abbott Laboratories at the start of 2013.  AbbVie is worth a look for the growth and income investors as it has a 4.2% dividend yield and a price target with 13% upside potential.

AbbVie’s most important product is Humira, an injectable biologic TNF (tumor necrosis factor) blocker treatment for rheumatoid arthritis (RA) and similar conditions, with sales of $9.3 billion in 2012, up from $7.9 billion in 2011.We estimate that Humira accounts for more than half of the global prescription pharmaceuticals market for rheumatoid arthritis. Besides moderate to severe RA in adults, Humira is also approved for eight other uses, including juvenile idiopathic arthritis, plaque psoriasis, psoriatic arthritis, ankylosing spondylitis, ulcerative colitis, Crohn’s disease in adults, juvenile Crohn’s disease and axial spondyloarthritis.

AbbVie’s strategic objectives include expanding Humira’s sales through greater penetration of emerging markets, increased emphasis on earlier diagnosis of autoimmune patients, and new indications. ABBV also plans to advance its R&D pipeline through internal development or through collaborations and licensing agreements. From 2013 through 2016, the company plans to launch five significant new products. The company also plans to maximize efficiency by streamlining the supply chain and optimizing residual value when products near the end of exclusivity.

In January 2013, ABT said that global sales of branded drugs that now belong to ABBV rose 7.4% to$5.14 billionin Q4, topping the$4.8 billionestimate of Wells Fargo analysts. Sales of Humira, ABBV’s leading product, increased 23% to$2.68 billion, about$200 millionabove Wells Fargo’s estimate.

The company estimated 2013 adjusted earnings at $3.03 to $3.13 a share, while analysts polled by Thomson Reuters expect $3.08 a share. Abbott had previously said fourth-quarter sales of Humira jumped 23% to $2.68 billion.  AbbVie said it expects the drug’s sales to increase by a low double-digit percentage in 2013.  The company also said it plans to initiate several Phase III programs this year, including atrasentan for diabetic kidney disease and ABT-199 in chronic lymphocytic leukemia.

The stock is reasonably priced with a current PE of 11.6 compared to an industry PE of 19.7.  AbbVie has a 12-month target price of $43 applies a modest premium to peers P/E of 13.4X to our $3.20 EPS estimate for 2014. The $1.60 annual dividend presently yields 4.2%.We think ABBV’s $7.2 billion cash position enables it to do accretive acquisitions and stock repurchases.  ABBV has an equity summary score of 9.9 out of 10 for a Very Bullish outlook.

The board of directors of AbbVie declared a quarterly cash dividend and also authorized a share repurchase program of up to $1.5 billion of the Company’s outstanding common stock.  The cash dividend of $0.40 per share is payable May 15, 2013 to stockholders of record at the close of business on April 15, 2013.  AbbVie was named to the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for at least 25 consecutive years.  AbbVie was included as a result of the Index’s change in its treatment of spin-off companies.

The Best Dividend Stocks for 2012 – Health Care

S&P recommends marketweighting the S&P 500 Health Care sector. Year to date through November 18, the S&P Health Care Index, which represented 11.6% of the S&P 500 Index, was up 4.0%, compared to a 3.3% drop for the S&P 500. In 2010, this sector index rose 0.7%, versus a 12.8% advance for the 500. There are 10 sub-industry indices in this sector, with Pharmaceuticals being the largest, at 51.7% of the sector’s market value.

S&P equity analysts have a neutral fundamental outlook on the key Pharmaceuticals sub-industry. We think this sub-industry faces challenging prospects in 2012, given an impending “patent cliff” beginning this year, austerity pricing in Europe, increasing generic drug penetration, and what we consider unimpressive new drug pipelines. On a positive note, emerging market sales are expected to continue to grow briskly in 2012. Also, increasing biotech M&A, low HMO utilization rates, attractive pharmaceutical sub-industry dividends and more efficient R&D spending offset the aforementioned negatives, in our view. According to Capital IQ, the sector’s P/E multiple of 10.7X consensus estimated EPS for 2012 is below the broader market’s P/E multiple of 11.3X. Its P/E-to-projected-five-year EPS growth rate (PEG) ratio of 1.3X is above the market’s PEG ratio of 1.0. This sector’s marketweighted S&P STARS average of 3.9 (out of 5.0) is slightly above the S&P 500’s 3.8.

The S&P GICS Health Care Index has broken out from a bullish, double-bottom reversal pattern, turning the intermediate-term trend to bullish, in our view. The sector also broke above a bearish trendline off the highs since July, confirming to us the trend change. Prices have popped back above both the 17-week and 43-week exponential moving averages, and the shorter average is back above the longer average, also bullish signs, in our opinion. Prices now face a small region of overhead supply between 400 and 420. Relative strength versus the S&P 500 was in an uptrend from February until the end of September, but that uptrend has broken to the downside. We have lowered our technical opinion on Health Care to neutral with a bearish bias, from neutral.

We recommend marketweighting the sector as we think an attractive valuation already reflects widely appreciated weak pharmaceutical drug pipelines and is therefore fostering more competitive performance as investors focus on newer positive catalysts and the sector’s defensive properties.

While patent expirations are hurting AZN’s growth profile, the company is making strides to launch new products, and currently approved drugs are still posting steady growth. We believe Astra’s most important new drug launches are diabetes drug Onglyza and cardiovascular drug Brilinta, which are showing respectable launches; we believe both drugs will eventually develop into blockbusters. Also, in-line products are generating steady growth, with the company’s leading drug Crestor up 14% operationally from the prior-year period. Despite mixed results against Lipitor, we believe Crestor sales will hold up well against low-cost generic versions of Lipitor expected by the end of the year.

Sanofi-Aventis’ (SNY) wide lineup of branded drugs and vaccines and a robust pipeline create strong cash flows and a wide economic moat. Growth of existing products and new product launches should help offset patent losses for cancer treatments Eloxatin and Taxotere as well as anticlotting agent Plavix.  Sanofi has compiled a robust group of late-stage pipeline products that complement its existing lineup and should help mitigate patent losses. We expect continued strength in the oncology class with potential blockbuster Zaltrap emerging from the late-stage pipeline. Also, diabetes drug Lyxumia looks to be a strong complement to the company’s well-entrenched diabetes franchise.

The table below shows the list of health care stocks making the high yield dividend stocks with bullish equity scores.

list of health care stocks making the high yield dividend stocks with bullish equity scores

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