- AMGN has history of EPS greater than Dividends paid out
- D/E ratio is a bit high
- Dividend on par with 10 year Treasury
- Covered Call options enhance income
First, lets look at AMGN's fundamentals.
On first blush AMGN would not pass my criteria test because EPS of $2.57 are much less than dividends paid out of $5.28. However, this is an aberration. AMGN took a big write-off in the 4th quarter of 2017. Without that write-off AMGN has consistently produced earnings in excess of dividends paid out and this is one of the "moats" that I use to quell my nerves.
The table below is courtesy of Nasdaq.com
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AMGN yields 2.8% which is pretty close to the 10 year U.S. Treasury. I need more income than a 10 year treasury or I would buy the more safe treasury.
AMGN carries a debt to equity ratio (D/E) of 1.158. My rule for D/E ratio is less than one or within industry standard. A good comparison is Gilead (GILD) which carries a D/E ratio of 1.395 making AMGN's D/E respectable. MSN Money calculates industry D/E average of .90 making AMGN's D/E ratio just a bit high. If AMGN has a weakness it is this slightly elevated D/E ratio.
Two catalysts make me want to hold onto AMGN.
- Annual Dividend raises: over 20% since 2015
- Covered Call options: add 1.13% to yield.
Today AMGN is one a few stocks in my personal portfolios that is up. Moreover, a very nice call is available. See the details in the table presented below.
I am not adding to AMGN at this time, I am however, working my portfolio for income on a stock that I feel has a good "moat" of safety. The call expiration is only 49 days away. While a call does limit upside potential, it also can limit my ability to unload AMGN should something go terribly wrong. This is why I chose an expiration date less than 2 months. If you go out further, you could capture the dividend in May, however, AMGN did not have any May calls available and I did not want to go out as far as June.
M* MoneyMadam