2 Pharmaceuticals with High Yields and Low Risk

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Feb 29, 2012
Johnson & Johnson (JNJ, Financial) is a multinational organization that has been operating in the pharmaceutical industry since 1886. It is one of the largest and strongest manufacturers of medicinal goods in the world, and it's performed consistently well over the years. The market has been growing drastically and there is a lot of competition as well, but JNJ has evolved with time and is a market leader in its own right.


Shares are currently trading at a price just above $65 per share. The 52-week range is from a low of $58 to a high of $68. Market capitalization at this price is close to $178 billion. The average trading volume is almost 10 million shares and there are approximately 3 billion shares outstanding in the market. Earnings per share (EPS) are more than $3 while the P/E ratio is above 18. The dividend yield is 3.5% and the last dividend paid by the company was close to $3 per share.


These statistics indicate that the stock is quite popular among investors. This is because it offers significant yields and earnings. Sales of the company are growing at close to 6%, and the net profit margin is nearly 15%. Beta for this stock is calculated to be 0.54 which means that it is a safer investment.


Experts in the market suggest that this stock would be a good investment option. This is because it offers high yields and is quite safe. Returns have been stable and the company has the potential to grow even more. It operates in one of the largest and most dynamic industries in the world. Prices are expected to remain somewhat stable during this quarter and probably for the next quarter as well.


Johnson & Johnson has been steadily increasing its dividend rates over the years. Where some companies were cutting their dividends during the global economic and financial crisis, JNJ was increasing its own. The company has been doing so for the last 55 years or more. It has been categorized as one of the top yielding stocks, and the dividend is expected to grow further this year.


It has also been reported recently that the CEO, William Weldon, has been given a 55% increase in annual bonus. This is in light of his performance during 2011 and his contribution to the company’s overall growth. This goes to show how well the company has been able to manage itself even during the economic downturn facing the global economy.


Abbott Laboratories (ABT, Financial) is a direct competitor for Johnson & Johnson. This company is also a multinational organization that has been in the pharmaceutical business since 1888 and has grown exponentially over the years. Abbott operates in almost the same categories as Johnson & Johnson and it too has contributed a lot to the industry. It is not as large as J&J but is definitely one of the most popular manufacturers of medical products worldwide.


The current trading price of Abbott’s stock is just above $56 per share. The price is near the higher end in the 52-week trading range. The lowest price during this time period was $46 per share. This means that the price has increased in the last quarter but it is predicted that it could fall during this quarter or the next.


Market capitalization based on this price is almost $89 billion while the average trading volume is more than 7 million shares. There are close to 2 billion shares outstanding in the market. This indicates that the stock is trading in heavy volumes and is extremely popular among investors.


The dividend yield is close to 4% and the dividend rate is above $2. Earnings per share (EPS) are $3 and the P/E ratio is nearly 19. Sales and income of the company are growing steadily with a net profit margin of approximately 12%. Returns are significant and yield is high which is the key factor taken into consideration by investors.


The debt to equity ratio is 0.63 which signifies that the debt is well-managed. Beta is calculated to be 0.30 indicating the stock is a safe investment. It is not highly volatile and is moving steadily. Industry experts and analysts have given this stock a high rating and suggest that stockholders should hold for returns and profit. For potential investors, it appears to be an attractive investment option.


A Comparison


Abbott’s stock is priced lower than that of J&J but they are both trading near the higher end of the 52-week trading range. Market capitalization of J&J is much higher than Abbott along with average trading volume.


EPS are almost the same but J&J is slightly higher. The P/E too is nearly the same but here Abbott is marginally higher. They are both high-yielding stocks and offer similar dividend rates to stockholders.


Abbott’s sales are growing at a much higher rate and the income growth is significant as well. J&J on the other hand is experiencing slower growth in sales and its income growth is shrinking too. The net profit margin for J&J takes a 3% lead over Abbott. Beta calculated for J&J stock is slightly more but this does not necessarily mean that the risk is high.


In short, both stocks would be viable investment options for investors. They both offer high yields and low risk. They both operate in the same industry and they both have significant potential to grow. Therefore, they would both be extremely helpful in developing a diversified portfolio.