A Look At The Top European Healthcare Companies

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Europe is home to some of the world’s top healthcare firms. Though all European countries have national healthcare systems, healthcare is still a big business worth billions of Euros. Drug firms for instance sell their products at a significant margin to health agencies. In addition, many European drug firms have substantial presence in emerging and frontier markets which offer another source of revenue. Denmark’s Novo-Nordisk (NVO) is expanding its diabetes drug sales to China as diabetes is affecting more Chinese due to food and lifestyle changes. Germany’s Fresenius Medical (FMS) has a huge market in the kidney dialysis field in the U.S.

The STOXX® Europe 600 Health Care Index can be considered as a  proxy for the European healthcare sector. The index has shot up an astonishing 98% in the past five years as shown in the chart below:

Click to enlarge

Stoxx Healthcare Index Return-5 Yeras

Note: Data is based on Euro price returns

The long-term return chart is also excellent.

Stoxx Healthcare Index Return-Long Term

Source: STOXX

The STOXX® Europe 600 Health Care Index is comprised of 40 components. Some of them trading on the US markets are listed below with their current dividend yields:

1.Company: Novartis AG (NVS)
Current Dividend Yield: 3.15%
Sector: Pharmaceuticals
Country: Switzerland

2.Company: Roche Holding AG (RHHBY)
Current Dividend Yield: 2.98%
Sector: Pharmaceuticals
Country: Switzerland

3.Company: Novo Nordisk A/S (NVO)
Current Dividend Yield: 1.37%
Sector: Pharmaceuticals
Country: Denmark

4.Company: Sanofi (SNY)
Current Dividend Yield: 3.85%
Sector: Pharmaceuticals
Country: France

5.Company: AstraZeneca PLC (AZN)
Current Dividend Yield: 4.21%
Sector: Pharmaceuticals
Country: UK

6.Company:GlaxoSmithKline (GSK)
Current Dividend Yield: 6.21%
Sector: Pharmaceuticals
Country: UK

7.Company: Fresenius Medical Care AG & Co (FMS)
Current Dividend Yield: 1.05%
Sector: Health Care Providers & Services
Country: Germany

8.Company: Novozymes A/S (NVZMY)
Current Dividend Yield: 0.96%
Sector: Health Care Providers & Services
Country: Denmark

9.Company: Smith & Nephew plc (SNN)
Current Dividend Yield: 1.86%
Sector: Pharmaceuticals
Country: UK

10.Company: Indivior PLC (INVVY)
Current Dividend Yield: 1.07%
Sector: Pharmaceuticals
Country: UK

Note: Dividend yields noted above are as of Dec 11, 2015. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long INVVY

Investors looking to add healthcare stocks can use these stocks are the starting point for further research.

 

UK vs. Europe: Dividend Yield and Concentration Graphic

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Dividends paid out by companies in the UK and Europe is concentrated among a few firms. In fact,  only five large names generated 45% of all UK dividends in 2014 according to a report by Schroders. These companies were  Royal Dutch Shell(RDS-A, RDS-B), HSBC(HBC), BP(BP), GlaxoSmithKline(GSK) and Vodafone(VOD).

A few of the European large companies drive the European dividends paid out to shareholders. The overall yield is lower than British yields but still the concentration is high.

The following infographic compares the dividend yields, concentration and sector yields of British and European firms:

Click to enlarge

UK vs Europe Dividend Yield and Concentration Chart

Note: All data shown above are based on August end, 2015

Source: Europe v UK: How safe is your yield?, Schroders

Disclosure: No Positions

Canada Non-Resident Withholding Tax Rates for Treaty Countries

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Countries have tax treaties with one another for offering preferential tax rates for investors and companies. Canada also has such tax treaties with many countries. For example, US investors get plenty of benefits for investing in Canada. For example, withholding taxes are NOT charged for interest paid out to US residents by Canadian banks and also on dividends paid out by Canadian companies (excluding REITs) to US qualified retirement accounts.

What are the withholding tax rates for countries with which Canada has tax treaties?

The following tables shows the latest tax rates for Non-Residents of Treaty Countries:

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Canada-Non-Resident-Withholding-Tax-Rates-for-Treaty-Countries-Sample

Canada-Non-Resident-Withholding-Tax-Rates-for-Treaty-Countries

 

Click on the above image to view the rates for the rest of the countries or download the pdf document below.

Source: KPMG Canada

Download:

One Structural Flaw in the Brazilian Growth Story

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The Brazilian economy and equity markets have been on a downward trend for the past few years. The benchmark Bovepa index is down 9.5% year-to-date. Ever since the Global Financial Crisis of 2008-09 Brazilian stocks continue to be poor performers. This is in sharp contrast to views held until a few years ago when the country was the top destination for global investors. However more and more it is becoming clear that the saying “Brazil is country of the future and always will be” is becoming true.

One of the obscured structural flaws in the Brazilian growth story is labor productivity, according to The Boston Consulting Group.Labor productivity simply means how efficient labor is or the output of a worker. For instance, there is a huge difference between a single worker operating a bulldozer to dig a ditch compared to 100 workers using a spoon and bare hands to dig the ditch.

From an article in BCG Perspectives:

How the Boom Obscured Structural Flaws
The boom of the previous decade obscured structural flaws in the Brazilian growth story. In emerging markets such as China, India, and South Korea, rising productivity has been the chief driver of GDP growth. In the case of Brazil, however, productivity grew by a meager 1% a year on average from 2001 through 2013, well below the increase in wages over that period. (See Brazil: Confronting the Productivity Challenge, BCG report, January 2013.) Instead, 78% of the nation’s GDP growth from 2001 through 2013 was attributable to increases in the employed workforce. (See Exhibit 1.) These gains were driven by average annual growth in the working-age population of 1.8% and by falling unemployment, which reached a record low of 4.8% in 2014. But Brazil’s population is aging, and annual growth in the workforce through the rest of the decade is projected to drop to 1.4%.

Productivity Gains between Emerging Countries

These factors translate into slower growth in most Brazilian industries. That is a considerable problem for many companies operating in Brazil and their shareholders. Our analysis shows that, on average, revenue growth contributed 12 percentage points of the total shareholder return (TSR) generated by companies on São Paulo’s BM&F Bovespa stock exchange from 2010 through 2014. (For an explanation of TSR, see “The Components of TSR.”)

During the same period, margins deteriorated significantly—offsetting the gains in TSR that derived from revenue growth. This was mainly the result of higher labor costs, excess capacity in several industries, and an overall loss of competitiveness. To finance revenue growth, moreover, companies diluted shareholder value. These were the main reasons for the average negative 4.6% TSR observed from 2010 through 2014. (See Exhibit 2.)

Brazil Total Shareholder Return Chart

Source: Creating Value in Brazil’s No-Growth Environment, BCG Perspectives

The full article is worth a read.

Brazil still has a long way to go in bring infrastructure to world’s standards. For example, the distance from Sao Paulo International Airport to the downtown is 25-20 Kms. It takes between 1-2 hours by taxi to reach downtown depending on traffic. There is no public transportation like an express train or a regular train to the downtown from the airport. Clearly too much productivity is wasted due to lack of efficient transportation systems.

Related ETF:

  • iShares MSCI Brazil Capped ETF (EWZ)

Disclosure: No Positions

Knowledge is Power: Top Global Energy Firms, Martial Country, Don’t Panic Edition

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Some earlier articles from TFS:

Water Foundtain Washington DC

Water Fountain in Washington, DC