We recently compiled a list of the 10 Best FTSE Dividend Stocks To Buy Now. In this article, we are going to take a look at where AstraZeneca PLC (NASDAQ:AZN) stands against the other FTSE dividend stocks.
The first half of 2024 has been notable for the UK equity market, as the FTSE 100, the benchmark index for UK company shares, hit a record high. However, stocks tumbled in the first week of June as financial shares mirrored broader losses in European markets. That was mainly due to the political uncertainty that unsettled investors and a slump in industrial mining stocks further dragged down the market. That said, with some time remaining in the general elections, there is still some potential for additional developments and surprises within the UK market. The index is up by nearly 6% this year so far, compared with a 14.3% return of the broader US market
The Bank of England (BoE) was one of the first central banks to begin increasing interest rates after the peak of the COVID pandemic. From December 2021 to August 2023, it raised the bank rate by 515 basis points to a 16-year high of 5.25% in order to address rising inflationary pressures in the economy. According to a Reuters poll of economists, the BoE is expected to begin cutting interest rates in August. Most economists also anticipate at least one more rate reduction this year, despite ongoing high inflation in wages and services. Yael Selfin, chief UK economist at KPMG, made the following comment on the situation:
“While we are seeing some tentative signs of cooling in the labor market, service sector inflation remains persistently high and it is likely the MPC would want to wait until the next set of forecasts and a few more data points before it embarks on its first rate cut.”
Overall, UK inflation is expected to remain slightly above the BoE’s target of 2.0% in every quarter until at least the end of 2025, according to the poll. Median forecasts indicated that inflation would average 2.5% this year and 2.2% next year.
After reaching new highs in 2024, the FTSE 100 may attract more investors, particularly those focused on income accumulation. The projected dividend yield of 3.8% for 2024 and 4.1% for 2025 is appealing, especially since these yields surpass the current inflation rate. Analysts predict that the ten largest dividend-paying companies in the UK will return £43.9 billion to shareholders, accounting for 55% of the total dividends from the FTSE 100. The top 20 companies are expected to contribute £57.4 billion, making up 72% of the total dividends.
In 2023, UK dividend growth of 5.4% aligned with the global average, according to a report by Janus Henderson. This increase was driven by substantial dividend increases from banks and oil producers, although it was tempered by lower payouts from mining companies. The report further mentioned that annual dividends in the UK grew to $86 billion in 2023 from over $63 billion in 2020.
While investors gravitate toward American dividend stocks, some of the best FTSE dividend stocks also offer similar investment opportunities.
Our Methodology:
For this article, we scanned through the list of FTSE stocks and picked dividend stocks from the list. From the resultant dataset, we picked the 10 best FTSE dividend stocks with the highest number of hedge fund investors tracked by Insider Monkey as of Q1 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A pharmacy worker distributing prescription medicines to patientsreceiving treatment for oncology, cardiovascular, renal, metabolism and respiratory diseases.
AstraZeneca PLC (NASDAQ:AZN)
Number of Hedge Fund Holders: 46
AstraZeneca PLC (NASDAQ:AZN) is a multinational pharmaceutical and biotech company, based in Cambridge, UK. Pharmaceutical companies are in a race to boost their annual revenue targets by 2030 significantly. AstraZeneca’s rival, Pfizer, expects to grow its annual revenue by $45 billion by 2023. Given its 2023 annual revenue of $58.5 billion, this growth would push the company’s total revenue to over $103 billion. This means that Pfizer is aiming to return to its peak performance of 2022 when its annual revenue surpassed $100 billion due to the high demand for coronavirus vaccines. On the other hand, AstraZeneca PLC (NASDAQ:AZN) expects to generate $80 billion in annual revenues by 2030, in addition to launching 20 new medicines during this timeframe. The company is gaining confidence to do so from the strong performance of its oncology segment, which showed a 26% year-over-year growth in the first quarter of 2024. While the numbers appear hopeful, the outcomes of scientific research are inherently uncertain. Furthermore, revenue forecasts can be influenced by competitive pressures and pricing dynamics. Though analysts commend AstraZeneca PLC’s (NASDAQ:AZN) enthusiasm and acknowledge that the company has met its set targets before, they believe it’s important to carefully consider industry dynamics before making ambitious claims.
That said, AstraZeneca PLC’s (NASDAQ:AZN) investments in research and development (R&D) may play a crucial role in reaching this objective. In fact, R&D accounted for 23% of the company’s revenue in 2023, up from 22% in the previous year. In addition to this, the company does not face severe challenges from its debt position, as its total debt is much less than that of Pfizer and it will have several more prominent medicines available on the market by 2030. With a forward P/E multiple of 18x, AZN appears attractively priced due to its recent earnings and forecasts.
AstraZeneca PLC (NASDAQ:AZN) currently pays an annual dividend of $3.10 per share, having raised it by 7% in April this year. With a dividend yield of 3.04%, AZN is one of the best FTSE dividend stocks on our list.
At the end of March, 46 hedge funds tracked by Insider Monkey held stakes in AstraZeneca PLC (NASDAQ:AZN), down from 48 in the previous quarter. The collective value of these stakes is over $2.1 billion.
Overall AZN ranks 2nd on our list of the best FTSE dividend stocks to buy. You can visit 10 Best FTSE Dividend Stocks To Buy Now to see the other FTSE dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of AZN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.