My High Dividend Stocks Blog

My High Dividend Stocks
This is my high dividend stocks site where I help site members find high dividend stocks with earning power and strong balance sheets.

Don't be fooled by Southern Copper's 8% dividend yield. Copper and Southern Copper are going down.

Southern Copper (SCCO) will go ex-dividend on Monday, but that is not the whole story.  The stock price will drop after the dividend and it will likely keep going down.

Southern Copper Stock To Go Ex-dividend Monday (SCCO)

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By TheStreet Wire 08/12/11 - 09:52 AM EDT

NEW YORK (TheStreet) -- The ex-dividend date for Southern Copper Corporation (NYSE:SCCO) is Monday, August 15, 2011. Owners of shares as of market close today will be eligible for a dividend of 62 cents per share. At a price of $31.41 as of 9:30 a.m. ET, the dividend yield is 8.5%.

The average volume for Southern Copper has been 3.5 million shares per day over the past 30 days. Southern Copper has a market cap of $24.7 billion and is part of the basic materials sector and metals & mining industry. Shares are down 36.8% year to date as of the close of trading on Thursday.

Southern Copper Corporation engages in mining, smelting, and refining mineral properties in Peru, Mexico, and Chile. The company has a P/E ratio of 12.4, equal to the average metals & mining industry P/E ratio and below the S&P 500 P/E ratio of 17.7.

* * * * * * *

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Copper is an industrial metal that goes up in price during a global booms.  When the global economy busts the copper price goes down.  There was a bust in 2008 and then a false recovery 2009-2011.  Investors are beginning to realize that the bust must continue in order to liquidate all the malinvestments made during the boom.  Governments and central banks are hell bent on preventing the markets from liquidating those malinvestments quickly.  They will continue to implement policies that forestall and jeopardize a real recovery.  Southern Copper will suffer as a result.

If you buy, then know that you will be buying on the way down.  I expect a dividend cut.  This company will remain a high dividend stock after it cuts its dividend because the stock price will be falling with the copper commodity price.  Copper peaked in January 2011 at $4.64 per pound.  It is down to $4.05 now and grinding lower on the realization of a “global double-dip recession”.  Don’t be fooled by Southern Copper’s 8+% dividend yield.

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Consider buying below $23.04 and sell it above $38.40.  The dividend is in jeopardy due to its dividend payout ratio exceeding 100%.  Its balance sheet is stagnant.

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Read my analysis of its fundamentals and technicals http://www.myhighdividendstocks.com/high-dividend-stocks/is-southern-copper-heading-north-or-south-from-34-74#more-515

Disclosure: I don’t own Southern Copper (SCCO)

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Total (TOT) is a high dividend stock now, but wait for oil to bottom before purchase.

Total (TOT) is now a high dividend stock thanks to the recent worldwide stock market crash and oil’s price plunge.  Total peaked back in May 2011 at $64.44.  The stock has fallen 27.9% since May to $46.42 today.  I wrote an article on June 23rd, 2011 on Total that had all my typical measurements of dividend record, earning power, and strength of balance sheet metrics.  Here is a quick recap: today’s dividend yield is 6.9% and is relatively safe, it earned an average of $4.64 per share (adjusted) over the past five years making it a value below $55.68, and it has a good balance sheet.

Click here for the June 23rd article: http://www.myhighdividendstocks.com/stocks-that-pay-small-dividends/which-integrated-oil-majors-will-become-high-dividend-stocks

This stock is a buy for its combined high dividend, earning power, and strong balance sheet.  But the fundamentals of oil are short term bearish.  The global economy never really recovered since the Panic of 2008.  Keynesian money printing and massive government deficits have only made things worse.  When worldwide investors slowly realize that there is no recovery the price of oil will tank.  Total will be dragged down by the drop in oil.  The dividend yield will become bigger as its stock price declines.  I think that Total could drop all the way back down to $36.82 like it did during the Panic of 2008 especially if oil drops to the $40-$50 range per barrel.

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Link to this chart: http://stockcharts.com/h-sc/ui?s=TOT&p=W&b=5&g=0&id=p26097042894

Look at oil’s hammering.  Oil’s fundamentals trump Total’s.  Wait to buy until oil is done going down.  Put Total (TOT) on your watchlist.

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Disclosure: I don’t own Total (TOT) yet.

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SeaDrill drilled lower. Should you buy it?

SeaDrill (SDRL) took a beating yesterday.  The stock price dropped over 10% while the broader market dropped 4%. 
 
SeaDrill is not low enough to buy yet despite the huge drop yesterday.  Consider buying SDRL when it drops to $15.12.  I wrote about SeaDrill in June.  That analysis still stands: http://bit.ly/SeaDrillJun2011.  I'm concerned that the dividend is not safe.
 
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AGNC reports 2Q2011 financials. Dividend in jeopardy and it is speculatively priced.

American Capital Agency Corp (AGNC) is nearly speculatively priced despite its low advertised PE ratio.  This company remains dangerously leveraged.  Higher interest rates and another credit crisis will destroy its profits.  But the yield remains huge until they cut their dividend.

Headline from a few days ago "American Capital Agency Reports $1.36 Earnings, $26.76 Book Value Per Share, Adds Two Directors"

Let's take a look at 2nd quarter financials

American Capital Agency Corp (AGNC)

Market price: $27.92

Shares: 178.51 million shares

Market Capitalization: $4.983 billion

Dividend record: 9 quarters of $1.40 dividend payments

Dividend: $1.40/share quarterly

Dividend yield: 20% ($5.60 annual dividend / $27.92 share price)

2nd quarter EPS: $1.36

Dividend payout ratio: 103% ($1.40 dividend / $1.36 EPS)  It gets harder and harder to pay that $1.40 dividend as the company continues new equity offerings to finance its leveraged finance.  AGNC will have to pay $250 million per quarter in dividends going forward (178.51 shares x $1.40 dividend).  They only earned $177.8 million this quarter.  Not good.

Earning power: $1.46 per share @ 178.51 million shares

(earnings adjusted for changes in capitalization.  There were only 15 million shares at the end of 2008.  They issue massive amount of shares to pay for their leverage.  There are over 178 million shares now)

                        EPS       Net inc.             Adj. EPS

2006                 -           -                       -

2007                 -           -                       -

2008                 $2.36    $35.4 M             $0.19   

2009                 $6.78    $118.6 M           $0.66

2010                 $7.89    $288.1 M           $1.61

----------------------------------------------------------

2011-03            $1.48    $133.5 M           $0.75

2011-06            $1.36    $177.8 M           $0.99

2011-09            ?           ?155.7 M?          ?0.87?

2011-12            ?           ?155.7 M?          ?0.87?

3 year average adjusted earnings (2008-2010) = $0.82 per share

4 year average adjusted earnings (2008-2011E*) = $1.46 per share

* I'm assuming that AGNC will earn the average of the first two quarters of 2011 which was $0.87.  This is conservative.

Based on the four year average:

Consider buying AGNC at or below $17.82 (12 times avg earnings)

Consider selling AGNC at or above $29.20 (20 times avg earnings)

AGNC is trading at 19.1 times average earnings assuming that the second half of 2011 will be the same as the first half.  This is almost speculatively priced.  Don't be fooled by the low PE ratios you see on Google Finance (3.97), Morningstar (forward PE 5.6), and Yahoo Finance (P/E ttm: 4.27)

Balance sheet: skyrocketing assets and liabilities due to ~8x leverage; equity going up

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Book value per share: $26.76 ($4776.646 M equity / 178.51 M shares)

Price to book value ratio: 0.999

Disclosure: I don't own AGNC and I don't plan on owning it.

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Analysis of Safe Bulkers (SB) 2nd Quarter Results

Safe Bulkers (SB) reported 2nd quarter financial results on Thursday July 21st, 2011.  Their board of directors declared a continuation of the $0.15 quarterly dividend.

http://bit.ly/SB2Q2011report 

The dividend is payable on or about August 31st, 2011 to shareholders of record at the close of trading of Safe Bulkers common stock on the NYSE on August 24th, 2011. Safe Bulkers has paid a $0.15 quarterly dividend since it's 2008 public offering.  They haven't established themselves as dividend growers, but the dividend yield of 8.3% is tremendous ($0.60 annual dividend / $7.21 share price).

Safe Bulkers dividend is still safe even in this horrible drybulk shipping market brought on by the global recession created by Keynesian central bank monetary expansion.  SB earned $0.27 per share this quarter and paid a $0.15 dividend.  The dividend payout ratio rose to 55.5% from 38.7% in 2010.  I don't like to see the dividend payout ratio to rise unless the dividend is increased.  But this increase in the dividend payout wouldn't worry me until it approaches 90%.  SB paid the same $0.60 annual dividend while earning an adjusted $1.55 in 2010.  The company conducted a 5 million share equity offering since 2010, so the $1.73 2010 EPS needed to be adjusted downward.

This year's annual earnings are on pace to be the lowest in the history of the company.  Safe Bulkers has earned an average of $1.90 per share over the past five years (adjusted for changes in capitalization due to share increases).  SB earned $0.41 in the first quarter of 2011.  It earned $0.27 this quarter.  Some faceless, nameless analysts expected earnings of $0.37 per share according to Reuters financial website.  Therefore, the financial press considered this quarter a earnings miss.  Let's assume that SB only earns 90% of it's 2nd quarter earnings in the 3rd and 4th quarters.    With these conservative assumptions the company would earn $1.16 per share.  This would bring the six year average EPS (adjusted) down to $1.84.  Safe Bulkers remains an extreme value stock trading at 3.92 average earnings including my hypothetical earnings estimates for the remainder of the year.  Consider buying SB below $22.08 per share (12 times average adjusted earnings).  Consider selling SB above $36.80 (20 times average adjusted earnings).  This high dividend stock is so cheap compared to other stocks!!

Coca-Cola (KO) trades at around 26 times average earnings.
Pfizer (PFE) trades at around 18.2 times average earnings.
Proctor & Gamble (PG) trades at around 16 times average earnings.

Safe Bulkers has 16 ships in it's operational fleet.  The fleet's average age is 4.4 years.  There are another 11 that will be added to the fleet over the next three years.  The company's average time charter equivalent (TCE) rate (think of as revenue per ship per day) was $27,921 in this quarter.  Estimated 2011 revenue = 16 ships x 361 operational days (99%) x $28,000 TCE = $160 million.  Only 23% of the fleet is rented out on the abysmal spot dry bulk market characterized by the Baltic Dry Index.  So only a small portion of SB's revenues are affected by the current market. Their fleet is contracted out at 59% in 2012 including the new ships joining the fleet.  If you are considering a purchase of Safe Bulkers, then you must monitor the Baltic Dry Index weekly (note: the BDI has taken a huge hit in the past three years due to the massive drop in the capesize rental prices.  Capesizes are the biggest ships.  SB owns very few of them, so the BDI can lose a larger percentage than SB's TCE in the same amount of time.)

Balance sheet (improving slightly)
Shareholder equity increased by $65.6 million.  Nearly $40 million of the additional equity came from the equity offering.

Companies with current ratios above 2.0 and a quick ratio above 1.0 are usually financially sound.  They have enough current assets to cover their current liabilities more the twice over.  The quick ratio measures cash on hand divided by current liabilities.  SB's current ratio dropped from 2.0 to 0.62 and their quick ratio dropped from 1.9 to 0.5.  The company's current ratio and quick ratio decreased due to spending money on advances to shipyards building their new ships.  These ratios should increase back to excellent levels once the new ships start producing revenues.

Conclusion: Safe Bulkers earnings miss will create an opportunity for high dividend stock investors who have done there homework to buy this excellent company at a low price.

Disclosure: I don't own Safe Bulkers, but I would like to.

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Safe Bulkers (SB) edges closer to a value buy opportunity

The Baltic Dry Index tracks the spot market dry bulk shipping rental rates.  The BDI has barely recovered from its January 2011 bottom.

http://bloom.bg/BDI_moves_lower

Traders/investors use the BDI as a barometer of global trade.  A lower BDI equates to a double dip recession in their minds.  Further erosion of the spot market will cause investors to sell dry bulk shipping stocks.  This will provide an opportunity to buy high dividend stocks like Safe Bulkers (SB) at a lower price.

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http://bit.ly/BDI2yearChart

Consider buying Safe Bulkers at or below $7.00.  Most of Safe Bulkers 16 ships are not contracted in the spot market.  They are in long term contracts between $20,000 and $30,000 per day.

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http://bit.ly/SB2yearChart

Please follow this link if you want to read my analysis in support of Safe Bulkers as a best dividend stock: http://bit.ly/SafeBulkers  Those articles cover its dividend record, earnings power, and its balance sheet.

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Are there high dividend stocks worth buying in the LNG shipping sector?

One of the Motley Fool writers wrote on July 7th, 2011 that there are huge dividends to be received from two liquid natural gas (LNG) shipping companies.  The article is a lead up to the recommendation of Teekay LNG Partners L.P. (TGP) and Golar LNG Ltd. (GLNG).  I had heard of Teekay before during my research of dry bulk shipper Safe Bulkers (SB), but I had never heard of Golar.  I didn’t have any awareness of these company’s dividend records, earning power, or strength of balance sheets.

http://www.fool.com/investing/general/2011/07/07/huge-dividends-from-americas-energy-game-changer.aspx

Teekay LNG has a dividend yield above 6% and Golar only yields about 2.6%.  Let’s take a closer look at each of these stocks to determine at what price to buy them low.  The bottom line is that they are both speculatively price right now, but at the right price they can be high dividend stocks.  It will take a few more years of increasing earnings to overcome their spotty records.  Don’t buy these stocks at today’s prices.

Teekay LNG Partners L.P. (TGP)

Market price: $37.10

Shares: 58.81 million

Market capitalization: $2.18 billion

Dividend record: strong and growing, but the earnings aren’t covering the dividend payments!!

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Dividend: $0.63/quarter

Dividend yield: 6.78%

Recent EPS: $1.45

Dividend payout ratio: 173% ($2.52 annual dividend / $1.45 recent EPS)  This is not good.  Expect a dividend cut in the not too distant future.

Earning power: $0.53 average earnings @ 58.81 million shares

(earnings adjusted for changes in capitalization; TGP has issued some shares over the years)

            EPS                   Net inc.             Adj. EPS

2006     ($0.28)             ($9.591 M)        ($0.16)

2007     $0.45                $25.662 M         $0.44

2008     $0.36                $19.486 M         $0.33

2009     $0.85                $42.145 M         $0.72

2010     $1.48                $78.728 M         $1.34

Five year average EPS $0.53

Consider buying below $6.36 (12 times average earnings)

Consider selling above $10.60 (20 times average earnings)

TGP is trading for 70 times average earnings.  This is highly speculative.

Balance sheet: Stagnant and unexciting; weak current financial strength

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Book value per share: $15.23  TGP traded below its book value as recently as late 2008.

Price to book value ratio: 2.43 (not too bad)

Current ratio: 0.27 (over 2.0 is good)

Quick ratio: 0.14 (over 1.0 is good)

Golar LNG Ltd. (GLNG)

Market price: $37.65

Shares: 68.12 M

Market capitalization: $2.56 billion

Dividend record: spotty, usually $0.25/quarter, no earnings to pay the dividend!!

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Dividend: $0.25 quarterly

Dividend yield: 2.6% ($1.00 annual dividend / $37.65 share price)

EPS: none

Dividend payout ratio: can’t be computed without earnings

Earning power: $0.65 per share @ 68.12 million shares

(earnings adjusted for changes in capitalization; GLNG has kept its number of shares very constant)

            EPS       Net inc.             Adj. EPS

2006     $1.05    $71.673 M         $1.05

2007     $2.07    $136.204 M       $2.00

2008     ($0.15) ($9.989 M)        ($0.15)

2009     $0.34    $23.082 M         $0.34

2010     $0.01    $0.384 M           $0.01

Five year average earnings $0.65

Consider buying at $7.80 (12 times average earnings)

Consider selling at $13.00 (20 times average earnings)

GLNG is trading at 57.92 times average earnings.  This is highly speculative.

Balance sheet: horrible trending downward

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Book value: $6.09

Price to book value ratio: 6.18 (bad because the stock is priced six times more than the capital invested in the company)

Current ratio: 0.78 (over 2.0 is good)

Quick ratio: 0.57 (over 1.0 is good)

Disclosure – I don’t own positions in either of these stocks.

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Safe Bulkers (SB) will report 2nd quarter results on July 21st.

Safe Bulkers (SB) will report 2nd quarter results on July 21st.

http://finance.yahoo.com/news/Safe-Bulkers-Inc-Sets-Date-iw-3230380523.html?x...

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Safe Bulkers (SB) is smart to buy ships at deep discounts. Now that's capitalism.

Safe Bulkers (SB) is one of my favorite high dividend stocks because it has a good dividend record, stable earning power in the worst dry bulk shipping market since they have been keeping records, and their balance sheet is strong.  Safe Bulkers (SB) might buy up to 10 ships next year.  This is smart because there will be bargains to buy.  Successful businesses buy assets cheap and put them to work profitably.  If they make smart purchases, then they won’t damage their balance sheet in the process.

This is from Reuters India:

BANGALORE | Fri Jul 15, 2011 1:19am IST

BANGALORE (Reuters) - Safe Bulkers Inc(SB.N), the fourth-largest U.S.-listed dry bulk carrier by market value, may buy up to 10 vessels next year as the weak market promises cheap bargains, its top executive said.

The company expects the new vessels to start operating by 2013, helping it cash in on the improving market where demand will outpace deliveries leading to better freight markets.

"By this time next year, we will have opportunities to order more ships as prices next year will be lower which will enable us to buy more reasonably prices ships," Chief Executive Polys Hajioannou said in a telephone interview from Athens.

The Greece-based company has a fleet of 16 vessels -- mostly from Japanese shipyards -- which mainly carry thermal and coking coal and it has 11 vessels scheduled to be delivered at various times through 2014.

Hajioannou expects to have a "fire power" of about $320 million to buy vessels, with $160 million of that being raised as debt by offering ships as collateral.

"We hope that the shipyards, mostly Japanese, should deliver competitive prices next year. At the moment they are not delivering competitive prices because the yen is strong now," Hajioannou said.

Since the downturn, the price of a panamax vessel has fallen almost 30 percent to about $33.5 million currently and is expected to drop further to $30 million by the end of the year.

Ship owners went on an ordering spree before the economic turmoil, resulting in an oversupply condition that hit the market hard. This has also forced companies like DryShips Inc (DRYS.O) to diversify into drilling and tanker businesses.

Safe Bulkers, valued at $545.8 million, however, has no such plans.

"We will remain dedicated to bulk shipping," Hajioannou said. "We don't believe that companies should be active on too many fronts, as it becomes difficult to monitor all markets."

The CEO expects a better dry bulk market next year as Japan, a big commodity consumer, will import more iron-ore and coal to help the reconstruction of the quake-hit country.

Commenting on the issue of piracy, Hajioannou, who is also a founding member of the Union of Cyprus Shipowner, said the shipping sector will have to live with the reality of piracy off the Somalia coast.

Piracy attacks have risen by a third in the first half of the year, and become more violent, with pirates using grenade launchers, machine guns and other weapons.

"I don't think there's a political will from the governments to intervene," the football fan said.

(Reporting by Vaishnavi Bala in Bangalore; Editing by Saumyadeb Chakrabarty)

Link to original article: http://in.reuters.com/article/2011/07/14/idINIndia-58265820110714

Disclosure: I don’t own Safe Bulkers, but I’d like to.

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First look at AstraZeneca pharmaceutical looks promising

I read an article titled “7 Companies Paying Large Dividends That Are Fully Covered by Earnings” by The Manual of Ideas.  It mentioned a drug company named AstraZeneca which produces several billion dollar drugs.  I haven’t written much on pharmaceutical companies so I thought I’d take a first look at AstraZeneca (AZN).

Here is the excerpt from the article:

AstraZeneca (AZN) ($50 per share; MV $68 billion; EV $65 billion) is a major pharma firm that develops cardiovascular, gastrointestinal, infection, neuroscience, oncology and respiratory and inflammation medicines. It had ten drugs with annual sales of $1+ billion in 2010, including Crestor, Nexium, and Seroquel. Crestor sales rose 26% from $4.5 billion in 2009 to $5.7 billion in 2010, while total revenue increased 1% to $33.3 billion in the period. The Street expects AstraZeneca to earn $7.17 per share in 2011 (7x P/E), followed by $6.07 (8x) and $5.97 (8x) in subsequent years. The annualized dividend of $3.00 per share, an increase of 18% from a year ago, implies a yield of 6.0%. AstraZeneca has boosted the dividend six times in seven years, delivering an annualized growth rate of 18% for the period. AstraZeneca has a high-return business, with a seven-year average return on equity of 36%.

Here is the link to the original article http://seekingalpha.com/article/278778-7-companies-paying-large-dividends-that-are-fully-covered-by-earnings

AstraZeneca (AZN)

Market price: $49.34

Shares: 1.37 billion

Market capitalization: $67.40 billion

Dividend record: AZN pays dividends twice a year usually in February and August.  The February dividend is usually 2-3 times larger than the August dividend.  Here is the last five years of dividend payments:

Date                  Dividend            Yield at that time

2/2/11              $1.85                3.88%

8/4/11              $0.70                1.33%

2/3/10              $1.71                3.97%

8/5/09              $0.59                1.26%

2/4/09              $1.50                3.92%

8/6/08              $0.55                1.11%

2/7/08              $1.35                3.55%

8/?/07              none?                None?

2/7/07              $1.23                2.16%

8/9/06              $0.49                0.81%

Dividend: $1.85 + at least $0.70 = $2.55 or greater

Dividend yield: 5.1% estimated

EPS (trailing twelve months): $5.72

Dividend payout ratio: 46% ($2.55/$5.72)

Earning power: $4.86 @ 1.37 billion shares

            EPS       Net inc.             Adj. EPS

2006     $3.85    $6,043 M           $4.41

2007     $3.73    $5,595 M           $4.08

2008     $4.20    $6,101 M           $4.45

2009     $5.19    $7,521 M           $5.49

2010     $5.57    $8,053 M           $4.86

Five year average EPS $4.86

Consider buying at or below $58.34 (below 12x average earnings)

Consider selling at or above $97.20 (above 20x average earnings)

Balance sheet: looks pretty strong

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Book value per share: $15.60

Price to book value: 3.18 (so-so)

Current ratio: 1.47 (above 2.0 is good)

Quick ratio: 1.35 (above 1.0 is good)

Conclusion: high dividend stock with growth potential, $4.86 average earnings @ 1.37 billion share, good balance sheet.  This high dividend stock is value priced.  I haven’t read all the earning releases and annual reports.  I will investigate further.  This company could join Safe Bulkers (SB) on the best dividend stocks list.

Disclosure: I don’t own AstraZeneca (AZN).

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