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Low Beta Dividend Stocks for an Uncertain Market

As the markets continue to show uncertainty and a lack of capitulation, investors are looking for a place to hunker down.  The best place at this time is in low beta stocks with dividend yields (defensive stocks) to support the share price.  I had identified 5 stocks that are up in price the last 4 weeks and have a bullish outlook for when the market rallies.  Here are 5 stocks to consider:

Tobacco operator Altria Group (MO) seems to do well in these types of markets.  It is up 4.9% over the last 4 weeks.  It has a low beta of 0.25 with a dividend yield of 4.91%.  MO has an equity summary score of 7.4 out of 10 for a Bullish outlook.

Low cost retailer Wal-Mart (WMT) shines when there is a slow economy.  WMT is up 14% in the last 4 weeks.  It has a beta of 0.33 and a dividend yield of 2.35%.  WMT has an equity summary score of 8.4 out of 10 for a Bullish outlook.

Telecom giant AT&T (T) is a steady as they go in this type of market.  AT&T is up 5.4% in the last 4 weeks.  It has a beta of 0.57 and a dividend yield of 5.03%.  AT&T has an equity summary score of 9.8 out of 10 for a VERY Bullish outlook.

Retailer Target Corp (TGT) has been performing great this year.  TGT is up 5.13% in the last 4 weeks.  It has a beta of 0.58 with a dividend yield of 2.06%. TGT just announced a 20% increase in its dividend.  TGT has an equity summary score of 9.2 out of 10 for a VERY Bullish outlook.

Pharmaceutical giant Bristol-Myers Squibb (BMY) is a solid dividend stock.  BMY is up 3.73% in the past month.  It has a beta of 0.41 with a dividend yield of 3.97%.  BMY has an equity summary score of 9.1 out of 10 for a VERY Bullish outlook.

Building a High Dividend Yield, Low Beta Income Portfolio (Part 2)

For income investors wanting to go it alone, they should consider creating a portfolio of high dividend stocks with low beta.  This type of portfolio will provide a risk to reward profile during times of uncertainty in the markets.  By adding the component of a bullish outlook to the low beta stocks indicates these stocks can be held in a long-term portfolio.  The high dividend yield can be compounded over time and will increase as these stocks raise their dividends each year.  This portfolio will be built in a series of articles.  You can read Part 1 here.  Below is Part 2 with more stocks to look at for adding your portfolio.

Eli Lilly and Company (LLY) discovers, develops, manufactures, and sells pharmaceutical products worldwide.  We believe LLY is executing well on its
strategy to counter the recent patent expiration on Zyprexa and impending expirations on other drugs that in the aggregate are expected to reduce annual
sales by about $7 billion from 2010 through 2014. To rejuvenate sales, LLY plans to bolster growth engines in Japan, emerging markets, animal health, and
drug franchises in oncology and diabetes. As of January 2012, LLY had 14 compounds in Phase 3 trials or under regulatory review. The most important
pipeline drug, in our opinion, is solanezumab for Alzheimer’s disease.  Lilly has a dividend yield of 4.67% and a 3-year beta of 0.54.  LLY has a PE of 10
with a ROI of 20%.  LLY has an equity summary score of 9.9 out of 10 for a VERY Bullish outlook.

Bristol-Myers Squibb Company (BMY) engages in the discovery, development, licensing, manufacturing, marketing, distribution, and sale of biopharmaceutical products that help patients prevail over serious diseases worldwide.  Preparing for looming U.S. and European patent expirations over the next four years on key products such as Plavix, Avapro, Sustiva and Abilify, BMY has become more active in recent years in expanding its new product portfolio through acquisitions and in-licensed products.  In March 2011, the FDA approved Yervoy, a novel treatment for advanced melanoma that we think has over $1.6 billion in sales potential by 2016. Another key R&D drug that we think has significant potential is Eliquis, a bloodthinning agent for stroke
prevention that BMY is co-developing with Pfizer (PFE). Supported by strong clinical data, sales of Eliquis should exceed $3.5 billion by 2016, in our
estimation.  BMY has a dividend yield of 4.17% and a 3-year beta of 0.50.  BMY has a PE of 15 with a ROI of 17%.  BMY has an equity summary score of 9.4 out of 10 for a VERY Bullish outlook.

Merck & Co., Inc. (MRK) provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products.  We believe Merck has an impressive new product pipeline, which should provide long-term growth despite headwinds from expiration losses and drug pricing pressures. In early February 2012, MRK said it planned to file five major products in the U.S. during 2012-2013, including: Bridion, a neuromuscular reversal agent; V503, a vaccine for HPV-associated cancers; odanacatib, a once-weekly oral drug for osteoporosis; tredaptive, an extended
release niacinbased agent for cholesterol reduction; and suvorexant, a potential first-in-class insomnia therapy. We also expect MRK to soon realize the
original $3.5 billion in synergies from its 2009 merger with Schering-Plough.  MRK also has an ongoing $5 billion share buyback program.  MRK has a dividend yield of 4.37% and a 3-year beta of 0.67.  MRK has a PE of 19 with a ROE of 11.5%. Merck has an equity summary score of 8.8 out of 10 for a Bullish

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

Click to enlarge



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