The Motley Fool

A FTSE 100 dividend growth stock I’d buy to protect myself from market volatility

The Federal Reserve’s decision to cut interest rates on Tuesday has helped share markets to bounce. Great news for stressed-out share investors, sure. But loading up on safe-haven stocks remains a great idea as the threat of the coronavirus remains significant.

Healthcare is one of those go-to sectors for share investors as medicines and health-related services, of course, remain essential, irrespective of broader social, economic and political troubles.

And so I reckon Hikma Pharmaceuticals (LSE: HIK) is a brilliant company to load into your stocks portfolio. The FTSE 100 pharmaceuticals giant certainly impressed with full-year trading numbers released in late February. Then it said that group revenue rose 6% in 2019, to $2.2bn. It’s a result that powered operating profit 33% higher to $493m.

Good news!

Demand is strong across all of Hikma’s businesses too. Sales across its Generics division leapt 33% year on year while revenues from its Injectables and Branded products rose 7% and 8% respectively.

Hikma launched 108 new products across its markets and signed a further 18 licensing agreements in the US and the Middle East and North Africa (or MENA) regions to bolster its worldwide product portfolio. It’s no wonder City analysts expect Hikma to keep growing the bottom line for the foreseeable future. Profits rises of 4% and 10% are forecast for 2020 and 2021.

Bright growth forecasts

The pharma ace’s profits outlook got even better with news of a blockbuster agreement with Glenmark Pharmaceuticals. The deal will see the former take care of the commercialisation of the Ryaltris nasal spray in the US, while its partner sorts things on the development and regulatory approval side. The move significantly bolsters Hikma’s position in the American nasal spray market, an area in which it is already the market leader by volume.

That’s not the only good news to come out in recent days. Thanks to its strong balance sheet the Footsie firm has the financial strength to keep developing its pipeline and build on the 169 approvals that it received last year. Hikma cut its net debt (excluding co-development agreements and contingent liabilities) to $242m in 2019 from $361m in the prior 12-month period. This means that its net debt-to-core-EBITDA ratio sits at a rock-bottom 0.4 times.

This impressive financial position means that annual dividends continue to sprint higher too. The business hiked last year’s total dividend to 44 US cents per share from 38 cents in 2018.

A brilliant buy today

At current prices, Hikma trades on a forward P/E ratio of 15.5 times. I consider this reading far too low given the strength of demand for its products and its brilliant pipeline.

The healthcare giant’s share price has performed much more resiliently than the broader market as the coronavirus has shaken market sentiment. That aforementioned trading statement illustrates why, Hikma commenting that “as we do not have extensive operations or manufacturing in China, nor are we directly dependent on Chinese-manufactured goods or services, we do not currently anticipate any material impact.”

Hikma’s low valuation and defensive qualities make it a brilliant buy for today, I feel. I’d happily buy it and hold on for years to come. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.