Daily Dividend: Will Amgen Finally Start Paying Shareholders? (AMGN, PFE, MRK)

It is time for “The Daily Dividend” and we have an interesting call ahead.  How long has it been that Amgen Inc. (NASDAQ: AMGN) has been touted as a “Should Be” dividend stock?  Too long.  We have gone as far as to even say that Amgen looks more and more like a Big Pharma drug stock rather than a biotech stock, with the key difference being that Amgen pays no dividend.  We have Amgen as one of our top candidates to initiate a dividend in 2011.

When you consider the dividends being offered elsewhere and many of the same underlying secular trends issues, why would investors currently choose Amgen over a Big Pharma leader?  Dow Jones Industrial Average components offer better yields and much of the same range-bound trading patterns: Pfizer Inc. (NYSE: PFE) pays roughly a 4% dividend yield and Merck & Co. Inc. (NYSE: MRK) pays closer to a 4.7% yield today.

Bloomberg is the latest to call for a dividend and its time frame was basically the same as our for a decision coming potentially in April.

It has ample cash (nearing $20 billion) and the calls for a possible dividend are at least two years old now.  It seems likely that Amgen will have to reconsider a dividend policy during 2011 if it wants to finally start rewarding shareholders.  That being said, a 1% to 2% yield is probably the most investors should expect as far as we are concerned.  That yield won’t touch the yields of Merck and Pfizer but it will be a monumental start.  The official line from the company’s investor site is “Amgen does not pay a dividend on stock, and does not foresee doing so in the immediate future.”

The company said as long ago as last summer that it was looking for large deals but it has bought back stock and made what we consider smaller deals and innuendos rather than committing to a seriously large deal that would reinstate growth in the near-term.

Our take: Amgen has little choice now but to at least to warm up to a dividend.  If Amgen does not start paying out 1% to 2% to shareholders, we’d hope it will at least make a transformative acquisition.  If not, this $50 to $60 price range could be the entire future of Amgen. 

JON C. OGG