Strange Bedfellows: PDLI Fuses Dividends With Biopharma

PDL Biopharma is in a category by itself, offering income investors a nice dividend stemming from sales of crucial drugs

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Strange Bedfellows: PDLI Fuses Dividends With Biopharma

It’s not often one hears the word “dividends” and “biopharma” in the same sentence, except maybe to point out that the two never seem to go hand-in-hand. Yet, there are (rare) exceptions to that norm.

One of those exceptions is PDL Biopharma (PDLI). Incredibly enough, PDLI currently boasts a dividend yield of 6.1%. Better still, PDL Biopharma is apt to keep paying solid dividends for the foreseeable future. Income investors looking to beef up their portfolio’s diversity may want to mull PDLI. Here’s a closer look at the details.

Big Dividends From a Biopharma Stock

pdli Strange Bedfellows: PDLI Fuses Dividends With Biopharma

PDL Biopharma is so unique that there’s not really a category for it within the investment world. The most relevant analogy would be to describe PDLI as a REIT (real estate investment trust) or an MLP (master limited partnership) for the pharmaceutical world. Though the company doesn’t enjoy the tax benefits of being a REIT, nor does it pass along the tax-filing work required of MLP owners, PDL Biopharma was built from the ground up as a machine that pays out the bulk of its income as dividends.

But how does a biopharma outfit do that? Unlike the most-storied of biotech companies seeking cures for cancer or diabetes — and spending heavily to do so PDL Biopharma aims to own patents or royalty rights to a portfolio of cost-effective, established (or at least promising), and consistently-marketable therapies. Think harder-hitting drugs than aspirin, but less splashy treatments than blockbuster arthritis drug Humira or the once-highly-touted prostate cancer drug Provenge.

Examples of the treatments currently driving income for PDLI owners include Avastin and Herceptin. Avastin is a therapy for a handful of different cancers where prior treatment has not resulted in an adequate response. Herceptin is a drug used to treat certain forms of breast cancer.

More relevant to potential or current shareholders of PDL Biopharma is how Avastin has consistently produced revenue of more than $600 million per quarter for many, many quarters. Not only is it technically a blockbuster, it’s a cash-cow. Herceptin is also a consistent provider of cash flow, and though its quarterly sales aren’t yet as strong as those of Avastin (less than $500 million per quarter), its revenue is growing at a faster clip. While Herceptin sees its patent cliff approaching and Avastin isn’t too far behind Herceptin on the same patent-expiration road, both will be able to fund dividends for PDLI owners for a few more years.

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Article printed from InvestorPlace Media, http://investorplace.com/2014/08/pdli-biopharma-dividends/.

©2014 InvestorPlace Media, LLC

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