Most stocks with high dividend yields are clustered in the more defensive parts of the stock market where the fundamental growth rates are low.
In distinction to these stocks, the investment company BB Biotech is focused on promising, future-oriented markets with strong growth prospects – and it offers a 5 per cent dividend yield as well.
Subject to shareholder approval, a dividend of CHF 2.75 per share will be paid out in 2017. Shareholders thus collect attractive dividends on top of the fundamental upside potential, which makes BB Biotech a true investment alternative in these times of low interest rates. Shareholders will be asked to approve the proposed dividend on March 16, 2017.
Biotech stocks had to contend with multiple challenges in 2016. At the beginning of the year they were unable to withstand the downward pressure that put financial markets around the globe into correction territory.
Amid all the anxiety about a sudden contraction in global trade, little attention was paid to the fact the healthcare industry, a defensive sector that is largely immune to the vagaries of the economic cycle, would be less affected by such a scenario.
Calls for government controls on spiraling drug prices issued by Democrats during the US election campaign season were a truly negative factor that undermined the general sentiment for healthcare stocks. What US healthcare policy will look like under the incoming administration is still unknown.
BB Biotech weathered the past investment year and all the volatility comparatively well. Its shares ended the year 0.3 per cent higher in CHF and 1.9 per cent higher in EUR and easily outperformed the Nasdaq Biotech Index (NBI), the standard benchmark for the sector.
Despite the uncertainty on the political front and the macroeconomic unknowns, the biotech sector‘s fundamentals have remained very solid.
Regulatory approvals of biotech drugs, successful clinical trials involving new treatment approaches and ongoing takeover activity are good arguments that suggest that the biotech industry will continue to deliver double-digit growth in the future.
An aging global population will remain the key factor keeping the rate of healthcare spending in industrialised and emerging market countries at a higher level than the corresponding rate of GDP expansion.
Bearing this in mind, investors should also note that the biotech industry still serves as the engine of innovation in new drug development.
Fast growing markets + dividend = BB Biotech
Investors can effectively capture this structural growth potential by investing in BB Biotech. And BB Biotech's 5 per cent dividend yield is welcomed even more when stock-market volatility is high, as was the case in 2016.
A dividend of CHF 2.75 per share will be proposed at the general meeting of shareholders on March 16, 2017.
Measured against the dividend yields of the stocks in the Swiss SMI index, BB Biotech would place in the highest yielding quartile of stocks. That is also the case compared to the FTSE stocks. BB Biotech would also rank among the highest yielding stocks in Germany‘s DAX.
In the broader Stoxx Europe 600 index, of which BB Biotech is a member, it ranks among the top 100 dividend-yielding stocks. In the Italian Star Index, BB Biotech places in the top 10 per cent. **
Ongoing share buyback programs of up to 5 per cent of share capital also generate value for BB Biotech shareholders. With its shareholder distributions policy adopted in 2013, BB Biotech aims to generate a return of up to 10 per cent p.a. for its shareholders.
Low interest rate makes compelling investments a rarity
With European bond yields still at rock bottom, high-yielding stocks are clearly a better alternative than investments in fixed income. Ten-year Swiss government bonds are currently trading on a negative yield of -0.23 per cent and even 10-year German government bonds are yielding only 0.31 per cent (as of Jan. 16, 2017).
Against this backdrop, the mix of fundamental growth and sustainable dividend income that BB Biotech offers will remain an effective tool for generating sustained value in investor portfolios.
Disclaimer:
This material is not intended as an offer or solicitation for the purchase or sale of shares of BB Biotech.
Opinions and estimates constitute the judgement of Bellevue Asset Management and BB Biotech and are subject to change without notice.
Past performance is not indicative of future results. This material may not be distributed within the US or any other country where it may violate applicable law.
Information herein is believed to be reliable, but Bellevue Asset Management and BB Biotech do not guarantee its completeness or accuracy.
* Based on the distribution of CHF 2.75 per share; return calculated on the weighted average share price in December 2016. Proposal to the General Meeting on March 16, 2017, record date March 21, 2017.
** Calculations based on share prices at the time the dividend was distributed in 2016.
