At the same day President Trump met with Health Care CEOs in the White House I decided to finally pull the trigger on a Health Care giant I have been eyeing for a long time. I was actually hoping that the ‘Tweeter-in-Chief’ would get the price down a bit - instead it enjoyed a little rally in the days after the meeting. Short term noise aside, let’s get to it!
On January 31 I bought 18 shares of Amgen Inc. (AMGN) for a total of $2,786.02. In this post I break down my reasons for adding Amgen to my portfolio and what this means for my dividend income.
Amgen Inc. discovers, develops, manufactures, and delivers human therapeutics worldwide. It offers products for the treatment of illness in the areas of oncology/hematology, cardiovascular, inflammation, bone health, nephrology, and neuroscience. The company’s products include - among many others - Neulasta, a pegylated protein for the treatment of cancer patients; NEUPOGEN, a recombinant-methionyl human granulocyte colony-stimulating factor for reducing the incidence of infection for patients with non-myeloid malignancies; and Enbrel to treat rheumatoid arthritis, plaque psoriasis, and psoriatic arthritis.
The company serves pharmaceutical wholesale distributors; and physicians or their clinics, dialysis centers, hospitals, and pharmacies, as well as consumers. It has collaborative agreements with Xencor, Inc; UCB; Novartis AG; Bayer HealthCare Pharmaceuticals Inc; Advaxis, Inc.; Dr. Reddy’s Laboratories Ltd.; Biocartis Group NV; and Nuevolution AB. The company also has a strategic collaboration with Immatics Biotechnologies GmbH. Amgen Inc. was founded in 1980 and is headquartered in Thousand Oaks, California.
Amgen has been paying dividends since 2011 -making it a ‘Dividend Challenger’ on David Fish’s list of Dividend Champions, Contenders and Challengers. The annualized dividend growth rate has been a very impressive 32.65%. From a dividend growth perspective this makes Amgen attractive, also given the fact that the pay-out ratio is quite modest at 44.92%.
The current dividend yield is 2.75% - lower than my average target of 3.5% - but similar to my recent Delta buy I am willing to accept this as long as the dividend growth rate makes up for it.
Amgen’s Earnings per Share (EPS) show a 5 year annualized growth of 20.4%. At my time purchase the Price/Earnings (PE) ratio was 15.2, below the 5 year average of 17.7.
Both the current as well as the 5 year average PE are lower than the industry average, indicating that Amgen is currently undervalued as compared to other Health Care stocks.
In their February 4 report S&P Capital IQ marks Amgen as a 4 star buy with 12 month target price of USD 214.
Given Amgen’s yearly dividend of $1.15 per share this buy means an addition of $20.7 to my forward dividend income.
What do you think about Amgen? Leave a comment/reply to share your thoughts!
I like AMGN also, I recently picked up some shares and looking to add more as new capital comes in. Waiting for the next Biotech shock to have a drop on shares.
What about $GILD? Just raised their dividends and will likely be sharply lower today.