Teva Pharmaceutical Industries Ltd is one of the world’s largest generic drug makers. Its fully integrated production capabilities make it one of the few generics makers that can replicate complex molecules and even biosimilars — one of the most promising sectors in the pharma industry.
Better yet, some short-term troubles — including a slower-than-anticipated integration of Allergan’s (AGN) generic drug division Actavis, which Teva recently bought for $40.5 billion — has resulted in lowered guidance and the market overreacting by selling off Teva’s shares to the tune of 45% in the past year.
This has created an appealing long-term buying opportunity.
Synergies from Actavis are expected to amount to $1.4 billion. Plus, Teva should achieve another $2 billion in ongoing cost cutting efforts set to boost the company’s already high FCF margin.
That should spell great news for dividend lovers, who already enjoy a generous and highly secure dividend. Better yet, with a low FCF payout ratio of just 31.2%, Teva has plenty of room to continue growing its payout at a solid clip as it continues its efforts to expand its market share in both developed and emerging markets.
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