Steve Sjuggerud didn’t highlight it, but he’s onto a terrific idea for income investors right now…
Last Wednesday, Steve showed you how several market sectors are incredible values right now. In some cases, these values are at 20-year extremes.
Some of my favorite values right now are the companies contained in the “RXL” fund Steve covered. “RXL” is the symbol for the ProShares Ultra Health Care Fund. It’s a basket of the world’s biggest health care companies. Most of the fund consists of Big Pharma stocks.
For folks interested in investment income, this is key…
Much of the time, Big Pharma stocks are great income investments. The best Big Pharma stocks have fat profit margins… and they sell products that many of their customers can’t live without. This allows them to pass large amounts of cash on to their shareholders in the form of dividends.
[ad#Google Adsense 336×280-IA]As Tom Dyson highlighted in DailyWealth, Big Pharma stocks are among the market’s strongest, steadiest performers over the long term.
And right now, some of my favorite Big Pharma stocks – which I’ve recommended in my Retirement Millionaire letter – are great values right now.
Abbott Laboratories, for example, is a large and diversified health care company. Buying Abbott is almost like getting five different companies… It’s divided into four segments – pharmaceutical, diagnostic, nutritional, and vascular – plus an assortment of businesses involved in diabetes and eye care (both surgical care, like LASIK and cataract removal, and consumer products, like contact lenses and eye drops).
Abbott is a classic Retirement Millionaire mix of safety and income. The company can grow sales during difficult economic times. In the past five years, it’s grown net sales 38%, from $22.3 billion to $30.8 billion.
It rewards shareholders and has increased its dividend for the past 38 years. Right now, Abbott has a dividend of 3.7%. And it’s currently trading for just 2.2 times sales… That makes it even cheaper than when I recommended it to my readers in February.
Eli Lilly is another great example of a Big Pharma stock you should be investing in. Lilly is the world’s 10th-largest pharmaceutical company and has a long history of producing major blockbuster drugs (like Cymbalta or Cialis). And Lilly’s success has translated into a steady income stream for investors.
It has a 125-year history of paying its dividend and a string of 42 consecutive annual increases. Its dividend is growing at around 7.5% a year. And right now, it yields 5.2%.
Lilly’s stock has taken a big hit in the last few years – down from $60 five years ago to around $38 today… Yet, it’s making nearly 50% more money today than it did back in 2007. This means we’re paying much less for the same dollar of earnings than we would have three years ago.
Big Pharma stocks are among the best stocks in the world at safely growing your money and paying dividends. They have a terrific tailwind at their back with the Baby Boomer generation growing older. And right now, they’re a great deal.
Here’s to our health, wealth, and a great retirement,
— Doc Eifrig
[ad#jack p.s.]
Source: Daily Wealth