With their 8% earnings growth rate and modest forward PE ratio of around 14, they have plenty of room to also continue their tradition of annual dividend increases. Their 5 year Dividend Growth rate is an impressive 15%.
Novartis (NVS) has a good list of patented products and a solid pipeline of new drugs in development. It is the second largest generic drug manufacturer in the world. They derive a substantial portion of their revenue from non-pharma health care products and over-the-counter medications (14%). We are told they generate massive amounts of free cash which they have used over the years to make a number of lucrative acquisitions.
Recently, NVS purchased Alcon, the world's largest and most profitable eye-care company. Wall Street thinks that NVS will only grow their earnings by around 7% during the coming years, and that is a modest target that NVS might just exceed. With a forward PE of around 14 and a 2.6% dividend yield, NVS will be a "steady-as-she-grows" kind of company and also likely to keep raising their dividend payout.
BP has corrected lately with the pullback in energy prices, and at a price of only $62.40 per share its dividend yield is an inspiring 5.2%. That should be a worthy compensation if oil and natural gas were to correct further and the price-per-share were to drop a bit more.
BP seems amazingly cheap to us right now at a forward PE ratio of slightly more than 6 (i.e. share price is a little more than 6 times their expected earnings-per-share over the next 12 months). In all fairness, their earnings growth rate has been a paltry 5%, but BP recently announced that they are investing $1.75B on a natural gas field in Oklahoma, buying out Chesapeake Energy's (NYSE:CHK) stake.
This and some other recent moves might boost earnings for BP, especially if energy prices stay at current levels. They are trying to rebuild their reputation as a shareholder-friendly company that rewards investors. Compared to their peers they are attractively priced.
Get Ready, Get Set, Not Yet
Yes, all 4 of these companies (including GE, which still sports a 4.4% dividend) could be tossed around by the current financial crisis and the market's volatility. That's why investors might like a "buy half now and buy the rest on the next big down week" approach.
Or you could do like one old-school analyst used to tell his clients, especially when approaching the historically tough market months of August, September, and October.
