For months now several analysts have been pointing out that despite big pharma's many problems some of the companies still pay healthy dividends. And when T-bills are offering next to nothing, a solid dividend yield in these rough and tumble times is a good thing.
Late yesterday Eli Lilly increased its dividend. Pfizer also announced that for the 281st straight quarter that it was paying a dividend. But, as Miller Tabak healthcare analyst Les Funtleyder points out in a research note to clients this morning this is the first time in 40 years that PFE isn't hiking the payout. PFE's dividend yield is already the highest in the sector--pushing eight percent.
Funtleyder says Pfizer's standing pat can be viewed two ways. On the one hand he writes, "The dividend is still above seven percent which makes the company seem almost distressed." But on the other hand Funtleyder says, "Despite the company's (approximately) $27 billion in net cash...they might be penalized for using any cash. The longer the cost of capital stays high, the more cash on a balance sheet becomes a competitive advantage. Should we be in for a prolonged lull in the capital raising cycle, PFE may be able to buy its way out of some of its pipeline deficiency."
- Lilly lifts dividend; Pfizer stays pat
- Pfizer's Takin' It To The Streets
If that's the case, Pfizer's got a lot of shopping to do. In a couple of years the 13-billion-dollar-a-year Lipitor goes generic. And PFE doesn't have anything that comes close to replacing it.
Whether it's Pfizer, Merck or whoever, I'm waiting for a wave of deals--big and small--to get done to help the industry cushion the fall from what insiders refer to as the looming "patent cliff." In fact, Deutsche Bank's Barbara Ryan is holding a conference call for clients today to talk about her big pharma M&A scenarios.
Perhaps because of their big dividends, big pharma blue-chips were reportedly among the stocks Bernie Madoff allegedly bought for his clients. I only mention that because today I'm sitting outside the federal courthouse waiting for the disgraced money manager to possibly make an appearance.
- FDA questions Lilly, Amgen cancer drug trials
Questions? Comments? Pharma@cnbc.com