In these daysof low growth and low interest rates, you cant beat a healthyincome stream. With the FTSE 100 currently yielding 3.69%, stocks and shares arethe best way of getting it. The following two UK-listed income heroesoffer even more generous yields, so has your portfolio got room for them both?
Pharma fun
Pharmaceuticals giant AstraZeneca (LSE: AZN) isa dividend legendand today yields a healthy 5.3%. Its share price is up 50% over the last five years, almost double the growth rate of the FTSE 100, so it has capital growth potential as well. However, its down 12% in the past month following a disappointing set of Q3 results, which saw an unnerving 14% drop in product sales, and 4% drop in revenues.
This is largely down to key treatments losing their generic protection, notably prescription cholesterol medicine Crestor in the US, which now faces multiple rivals. On the plus side AstraZenecasgrowth platforms were up 3% in the quarter, and 6% year-to-date, thanks to heart treatmentBrilinta, and various diabetes and respiratory treatments. Its range of next-generation cancer products also look promising.
In the year 2024
Chief executive Pascal Soriot continues topromise jam tomorrow. So how sticky are things today? More than I would like, with earnings per share (EPS) forecast to fall 3% this year and 6% in 2017, extending the negative run tosix consecutive years. Soriot is projecting revenues of more than $45bn by 2023, now just seven years away. Thats quite a leap from 2017s projected $17.67bn, and the cost of failure is high.
The longerinvestors have to wait for newtreatments to deliver blockbuster profits, the more nervous they willbe. The valuation has dipped to 12.5 times earnings to reflect that danger. All now depends on that one great unknowable: how healthywill the drugs pipeline be? Soriot is confident, saying that its starting to flowat a pace we could not have anticipated three years ago,with recent positive results forTagrisso (lung cancer),Lynparza (ovarian cancer) and benralizumab (severe, uncontrolled asthma). Such optimism is infectious. Much will be decided in the next 12 months, but AstraZenecastill has plenty of hero potential.
HSBC hops
Investors who took a chance on troubledAsia-focused bank HSBC Holdings (LSE: HSBA) will have been well rewarded with the share price up almost 50% in the last six months. Thats good to see, given that in the summer I said its 7.24% yield was too juicy too ignore. It still pays income of6.2%, thrashing the average easy access savings account, which pays 0.43%.
HSBC has been slashing costs, makingsavings of $2.8bn a year withthe promise of more to come, and disposing of non-core assets, including its $40bn Brazilian business. The $1.7bn loss on that transaction cast a shadow over Q3 profits, although adjusted profitswere up a steady 7% to $5.6bn. Chiefexecutive Stuart Gullivers turnaround is taking time and the dividend is covered just 1.3 times, so it could be imperilled in 2017, whichwill also inflict damage onthe share price. Given HSBCsrecent 50%surge, it may be worth hanging back to see what the New Year brings.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca and HSBC Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
