Industry Voice: High growth plus dividends - an attractive combination for investors


Dr. Daniel Koller, head of management team, BB Biotech

daniel-kollerStocks with high dividend yields are usually found in the more defensive sectors of the stock market that have little upside potential.

This is not the case with the investment trust BB Biotech AG (ISIN: CH0038389992). Established in 1993, BB Biotech is a pioneer in biotech investing and has grown to become one of the largest biotech investors with €3.5bn assets under management.

The stock combines fast growth with an attractive dividend yield. In 2015 it plans to pay a tax-efficient cash distribution of CHF11.60 per share, which represents a significant increase of 65% versus the previous year and corresponds to a dividend yield of 5%*.

So shareholders are receiving an attractive dividend on top of the upside drivers biotech offers - a compelling alternative in times of ultra low interest rates and a lack of sound investment stories.


Biotech sector – annual growth rates in the double-digits

The biotech sector extended its outperformance track record in 2014. The Nasdaq Biotechnology Index (NBI) advanced 34%, which was more than twice the gain of the S&P index (in USD). New product approvals, positive clinical trial data, strong corporate results and ongoing M&A activity propelled biotech stocks to higher ground.

The solid fundamentals and positive outlook are manifest in the sector's double-digit growth potential. Biotech companies are growing much faster than many other sectors around the world.

BB Biotech's share price advanced 79% last year (in EUR, incl. cash distribution) and topped the performance of the NBI benchmark index by 23% (in local currency). With BB Biotech, shareholders gain access to a well diversified portfolio with clearly defined investment priorities.


High growth doesn't preclude high dividends

Biotechnology shares and dividends - that is usually a contradiction in terms. Of the 152 stocks in the Nasdaq Biotechnology Index, a mere four are paying out dividends. Investors generally must choose between dividends or growth.

Not so with BB Biotech AG, a stock that offers both. The biotech sector has been growing at a fast clip year after year and BB Biotech will be paying out a tax-efficient cash distribution of CHF11.60 from paid-in capital reserves this year, which corresponds to a return of 5%* based on the average share price in December 2014. In absolute terms, this represents an increase of 65% from the previous year.

This 5% dividend yield puts BB Biotech in the top quartile compared to the dividend yields offered by companies in the FTSE 100. Measured against the Stoxx Europe 600, BB Biotech ranks even in the top quintile**.

Besides the attractive dividend yield, BB Biotech is also conducting continual share buybacks of up to 5% of share capital p.a. BB Biotech's payout policy introduced in 2013 is designed to give shareholders a return of up to 10% p.a. This is tax-optimized capital income and it represents a reliable flow of low-tax income for shareholders in the coming years.

This makes it an option that is really worth considering at a time of record low interest rates on fixed-income investments.

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*Cash distribution of CHF11.60 per share, exempt from withholding tax; return calculated on the weighted average share price in December 2014. Proposal to the General Meeting on 18 March 2015; record date 23 March 2015.

**Calculations based on share prices at the time the dividend was paid in 2014.

Disclaimer: This advertisement is directed at investment professionals in the UK only and should not be distributed to, or relied upon by retail investors. This material is not intended as an offer or solicitation for the purchase or sale of shares of BB Biotech. Opinions and estimates constitute the judgement of Bellevue Asset Management and BB Biotech and are subject to change without notice. Past performance is not indicative of future results. This material may not be distributed within the United States or any other country where it may violate applicable law. Information herein is believed to be reliable, but Bellevue Asset Management and BB Biotech do not guarantee its completeness or accuracy.

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