Merrill Lynch critiques Teva over dividends

“We don’t get the sense that management is excited to think about its dividend as a meaningful portion of an investor’s expected return in owning Teva shares."

By TAL MOISE/GLOBES
August 30, 2011 07:27
1 minute read.
Teva Pharmaceutical Industries.

Teva Pharmaceutical Industries. . (photo credit: Ariel Jerozolimski)

 
X

Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

Merrill Lynch questioned the dividend policy at Teva Pharmaceutical Industries in a new review.

“We don’t get the sense that management is excited to think about its dividend as a meaningful portion of an investor’s expected return in owning Teva shares. But, with a large revenue base that becomes increasingly tough to grow at a high rate, we believe more discussion around Teva’s capital deployment strategy is inevitable.”

Be the first to know - Join our Facebook page.


Analysts Gregg Gilbert, Haim Israel, and Sumant Kulkarni nevertheless reiterate their “Buy” recommendation for Teva, with a target price of $52.

“With a 4-5% yield available from US major pharma stocks, Teva’s yield may not be enough to attract income-oriented investors at this point, but we believe it should offer some level of downside protection for the shares.

We continue to rate Teva shares ‘Buy’ as we believe investors appear overly pessimistic on the size and duration of Copaxone cash flows, dismissive of laquinimod as a potential driver, and skeptical of effective cash deployment,” the analysts added.

“While debt pay-down following the Cephalon deal will likely be a priority, we estimate an average of just under $4 billion in annual free cash flow (pre-dividend) generation in 2012-2015. Teva’s current dividend burden is only roughly $800 million per year. In the past few years, Teva has increased its dividend in the mid- 20% range.”

The analysts estimated Teva’s dividend yield at 2.3% in 2011-12, and 2.4% in 2013. They predict 9.2% sales growth in 2011 to $17.6 billion, and 23.8% growth in 2012 to $21.8 billion, but falling by 5% to $20.7 billion in 2013.



Gilbert, Israel and Kulkarni predicted non-GAAP earnings per share of $4.90 in 2011, up 8% over 2010, and rising 26% to $6.17 per share in 2012, but falling 14.3% to $5.29 per share in 2013. They predict non-GAAP net profit of $4.39 billion in 2011, $5.52 billion in 2012, and $4.73 billion in 2013.

Teva’s share price rose 2% on Nasdaq to $29.42, giving a market cap of $35.1 billion, and rose 0.6% by midafternoon to NIS 142.80.

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection

By GLOBES, NIV ELIS