London Markets: AstraZeneca has scope to increase dividend by 25%, key broker says, as broader FTSE 100 edges lower

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Anglo-Swedish pharmaceutical AstraZeneca has scope to increase its dividend by 25%, a key broker said on Friday.

AstraZeneca AZN, -0.51% AZN, -1.41% can increase its dividend to about $3.50 per share next year, said analysts at Bank of America, which would give the maker of the COVID-19 vaccine a 3.5% yield. That would make the stock appealing to U.K. income investors, and contrasts with rival drug company GlaxoSmithKline GSK, -0.56% GSK, -0.65%, where the yield is set to fall to around 3% to 4%, from 6% currently, after its consumer health unit is spun off.

Bank of America’s new view toward AstraZeneca is due to its agreed buyout of Alexion Pharmaceuticals, which is expected to close in the third quarter. AstraZeneca, at about 14 times 2022 earnings per share, is trading in line with other European pharmaceuticals, despite having a better growth outlook and many drugs in the pipeline, Bank of America said.

AstraZeneca slipped 0.5% and Glaxo eased 0.6%.

The broader FTSE 100 UKX, -0.12% eased 0.2%, underperforming its European rivals SXXP, +0.53%. Losses for consumer-products maker Unilever ULVR, -1.42%, banking giant HSBC Holdings HSBA, -1.31%, and mobile-phone operator Vodafone VOD, -1.68% weighed on the index.

Barratt Developments’ BDEV, +3.48% shares rose 4% as the home builder said it would resume dividends after first-half sales rose 12%. “The increased volume profile combined with some more house price inflation also bode well for better margins over the next 12-18 months,” said analysts at Peel Hunt.