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3 Reasons Why I’m Bullish On AstraZeneca plc

AstraZeneca (LSE: AZN) (NYSE: AZN.US) has been in the headlines a lot in recent years because of its ‘patent cliff’.

For those Fools who aren’t up to speed on what this is, it’s basically a lack of new drugs coming on stream to replace the ones that are set to go off-patent. In other words, AstraZeneca has a lack of new revenue streams to replace the revenue streams that are no longer going to be protected by patents.

Clearly, this is a major problem for a drugs company that relies on patents to protect its margins and, ultimately, its profits.

However, the ‘patent cliff’ has been known about for several years, with AstraZeneca’s shares being hit as a result of concerns surrounding it.

For me, though, this presents an ideal opportunity to buy shares in a fantastic turnaround story for three key reasons.

Firstly, shares offer a fantastic yield of 6%. This puts them at the top table of high-yielding shares and means that AstraZeneca is an obvious choice for income investors like me.

Indeed, a yield of 6% is more than three times what I can get in a savings account and is more than double the rate of inflation.

Furthermore, dividends per share are very well covered and, even with the considerable fall in earnings priced in, dividends look set to be well covered for a good while yet. This offers at least a degree of stability and peace of mind to shareholders.

Secondly, new management has adopted a much more aggressive strategy with regards to overcoming the ‘patent cliff’. They have ended the share-buyback programme and set about buying up the rights to other drugs so as to try and rebuild the aforementioned declining revenue streams.

Although it will take time for the strategy to come to fruition, it looks set to.

Thirdly, AstraZeneca is a defensive stock with a low beta. This means that, with the FTSE 100 being within 5% of its all-time high and having a high price-to-earnings (P/E) ratio of 15, AstraZeneca could prove to be a sound option should markets fall.

So, I’m bullish on AstraZeneca due to its well-covered and impressive yield, sound strategy and defensive qualities. The fact that it is a great income stock, though, is probably the key, key reason, of course.

However, another stock that offers a high yield is also of great interest to me. Indeed, if you are an income-seeking investor like me then I'm confident it will be of interest to you, too, since here at The Motley Fool we consider it to be The Top Income Share Of 2013.

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> Peter owns shares in AstraZeneca.