3 Super Dividend Healthcare Stocks: PDL BioPharma, GlaxoSmithKline, AstraZeneca

Published on January 17, 2013 at 3:32 pm by The Motley Fool in Dividend Stocks

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The financial uncertainty in our debt markets has increased the attractiveness of high dividend stocks. Moreover, international markets are showing no sign of immediate recovery, and financial uncertainty will continue well into 2013. I recommend that investors looking for regular streams of income buy dividend stocks, but only those which have strong fundamentals. The following 3 companies offer a high yield, and analysis shows their dividend is sustainable.

PDL BioPharma (NASDAQ:PDLI)

PDL is a little different from other healthcare companies. It is primarily an IP asset management company that aims to distribute wealth through dividends, of its royalty bearing assets. The Nevada-based company offers patents covering different aspects of humanizing antibodies. The company currently offers an 8% dividend yield and has a payout ratio of 43%.

The most interesting aspect of PDL’s dividend is its suitability, due to its unique model. The company basically pays back the royalties it collects in the form of a dividend; therefore it bears no risk itself. The financial position of the company is sound, with the current ratio approximately 30% above the industry average. Moreover, the stock is currently trading at a P/E of 4.7x and a mean sell side price estimate is $6.90. I believe PDL’s dividend is sustainable, and it is a good dividend play.

PDLI data by YCharts

GlaxoSmithKline (NYSE:GSK)

GlaxoSmithKline is one of the world’s largest pharmaceutical companies, and has a market cap of more than $100 billion. The company is involved in the discovery and commercialization of various pharmaceutical products. It offers treatments for HIV, CNS (Central Nervous System) diseases, cardiovascular diseases, metabolic, respiratory diseases, vaccines, etc. GSK has a forward annual dividend yield of 5.2%, which is more than twice industry average and the highest amongst big pharmaceuticals.

On the downside, the payout ratio is pretty high (77%) and the company is also highly leveraged. However, the operating cash flow yield is 5.7% and is above the dividend yield, which shows that at these levels its dividends are sustainable. The stock is currently trading at a P/E of 11.6x, which is well below the NYSE average of 18x and has a 10% upside, based on mean sell side estimates. Therefore I believe it’s a good buy for dividend and capital gains.