Dividends4Life: Buy These Pharma Dividend Stocks Instead Of T-Bills

Buy These Pharma Dividend Stocks Instead Of T-Bills

Posted by D4L | Thursday, September 08, 2011 | | 0 comments »

The yield on a 10-year T-bill was less than 2.3% [on 8/29/2011]. I understand the whole flight-to-safety thing, but who the heck is buying those things? Pharma stocks offering dividend yields that are double the current interest rates on 10-year T-bills look like a much better risk-reward proposition. True enough. T-bills are backed by the full faith of the U.S. government, which despite what Standard & Poor's might say, is still as valuable as it gets. When you buy stocks, there's a risk that the share price will decrease.

If we're comparing investments in pharmas to 10-year T-bills, shouldn't we be looking at what pharma's value will be in 10 years? Even in the long drug development cycle, 10 years is plenty of time to turn things around. A decade from now, most of the early-stage drugs will have progressed through phase 3 testing and will be on the market if their efficacy and safety pan out. If you have a long-range forecast -- and why else would you be considering 10-year T-bills? -- you can likely make considerably more with dividend stocks with only a modest increase in risk.

Source: Motley Fool

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