As we move into earnings season, Reuters has crunched the numbers on your favorite Big Pharma companies and put the results into a handy-dandy bar chart that ranks them by various measures: P/E ratio, earnings growth, dividend yield, market cap and stock-price change. Some of the resulting lists fall in to-be-expected order; for instance, it shouldn't surprise lots of people that Eli Lilly's ($LLY) at the bottom of the market-cap list and Pfizer ($PFE) is near the top.
What we found most interesting was the relationship between dividend yield and earnings growth--or should we say dividend yield and lack of earnings growth. The four companies expected to deliver negative earnings growth this year are Roche (-2.8%), Sanofi ($SNY) (-6.4%), Eli Lilly (-8.2%) and GlaxoSmithKline ($GSK) (-12.4%). Next year it's Sanofi (-11.9%), Bristol-Myers Squibb ($BMY) (-14%), AstraZeneca ($AZN) (-14.5%) and Eli Lilly (a whopping -26.7%).
Surprise, surprise--or perhaps not at all, if you've been following Big Pharma's payouts to shareholders. The 5 companies with the highest dividend yields were those same suspects: AstraZeneca (5.7%), Eli Lilly (4.9%), GSK (4.7%), Sanofi (4.4%) and Roche (4%). Only BMS made the negative-earnings list (for this year) without moving above the middle of the pack, dividend-wise.
Of course, there are logical relationships between these things. Expecting disappointing earnings inspires companies to offer, shall we say, other inducements to keep shareholders happy. With dividends in hand, and stock-buybacks shoring up their shares, investors are more likely to stick around through the valley of the shadow of the patent cliff. And those buybacks do appear to be working, at least for AstraZeneca: It tops the price-change chart with 4.6% growth.
- see the graphic from Reuters