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Feb.13
1:04 PM ET
Wednesday, 13 Feb 2008
Pfizer and High Yielding Healthcare

With a 5.6% dividend yield, Pfizer [PFE  Loading...      (%)   ] is currently the highest yielding stock in the Dow Jones Industrial Average [.DJIA  Loading...      (%)   ]and ranks 20th in yield on the S&P 500.  As a point of comparison, 30 Yr treasuries and the Lehman Aggregate Bond Index are yielding about 4.5%.  The Lehman Corporate Bond Index is yielding 5.55%. So is it the time to buy PFE?

Maybe in a volatile market like we have been experiencing, it is good to look for yields like Pfizer's.  The healthcare sector is a traditional defensive play during an economic downturn.  People still need to take their meds and a good dividend is a hedge against downward movement.  In the 1990-91 recession, the S&P Healthcare Index gained 22%.  During the 2001 recession, the index fell 1.3% but was the second best performing sector overall (only the S&P Materials index has a positive return).

Here are the top yielding stocks in the S&P Healthcare Index:

  S&P 500 Healthcare Sector
SymbolCompany Name% Yield3 Month % ChgPEFwd GrowthPEG
PFEPfizer5.64-4.218.86.33.0
BMYBristol Myers Squibb5.35-20.522.017.91.2
LLYEli Lilly and Co3.69-4.518.710.21.8
MRKMerck & Co3.27-20.031.712.02.6
WYEWyeth2.87-18.611.87.21.6
JNJJohnson and Johnson2.64-6.417.55.93.0
ABTAbbott Labs2.32-2.324.811.52.2
MYLMylan1.86-9.810.5-51.3-0.2
COVCovidien1.478.9-71.613.6-5.3
BAXBaxter Intl1.423.523.813.21.8

Data provided by Reuters

Both Pfizer and Bristol Myers [BMY  Loading...      (%)   ]offer high yields.  Both are trading at PEs below the sector average of 24.  BMY has been beaten up a lot lately and the analysts are projecting  good growth between this current fiscal year and the next year giving it a more attractive PEG.  According to Thomson Financial, if you look at the analyst picks, BMY has 7 buys, 12 holds and no sells.  PFE has 9 buys, 12 holds and 2 sells.

Looking at their charts, they both are trending downward.  Pfizer's 200 day moving average turned south back in June of last year while BMY went downward in January.

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