Earn well from AstraZeneca

The price broke through the 3,500p resistance level in January, a feat not achieved since mid-2006. Granted, some City analysts think the price has become overheated, yet a slight tail-off in recent weeks now provides a more attractive and sustainable entry point for patient investors wanting to earn income from Astra's nice dividend yield.

True, companies under pressure often distribute too much by way of dividends - and AstraZeneca's payout has remained unchanged for three years. Even so, the present level will generate a 4.4 per cent yield, better than the FTSE 100 average yield of 4.2 per cent. The payout also looks better supported than that of its closest rival, GlaxoSmithKline (GSK). The two companies always beg for comparison, but currently AstraZeneca looks the better of the two.

While there is nothing to choose between the dividend yield of the two, underlying business gains, particularly from research and development (R&D), favour AstraZeneca. In addition, GlaxoSmithKline is currently weighed down by multiple bribery probes - more emerge with regularity. It has long been rumoured that big pharma sales people bribe their clients but, so far at any rate, AstraZeneca is untainted by the bad publicity. If that continues, it should help its share price.

AstraZeneca's management overhaul, which brought in new chief executive Pascal Soriot, has been key to improving visibility of the products in the development pipeline. No investor should expect fast-paced growth from any big pharma outfit at the moment, but the success of the pipeline will be crucial in strengthening the company's outlook. Mr Soriot has already proven his commitment to a new generation of respiratory and cancer treatments - they are either in final-stage clinical trials or headed that way - and has had success in the diabetes division since buying out partner Bristol-Myers Squibb from its shared business at the start of the year for £1.7bn.

Granted, the progress of AstraZeneca's development pipeline may not be as rapid and as recent as the newish chief executive likes to claim. Even so, the group's R&D progress stands in contrast to events at GSK and even speciality pharma rival Shire (SHP), both of which suffered failures in clinical trials for key products. The market will wait for positive news from AstraZeneca towards the end of the first half of 2014 when it will present the latest data on its pivotal PDL-1 Alzheimer's drug. So far, the drug hasn't recorded any of the common adverse effects that other pharma companies have experienced with similar products.

But this will not be the only catalyst. AstraZeneca expects four to five of its new products to enter late-stage trials this year, meaning the share price could be boosted by positive clinical news. Of course, shareholders should expect R&D spending to increase, but the group carries little debt so funding should not be an issue.

That said, 2013's results were not strong and did not prompt ambitious 2014 forecasts - on an underlying basis, Deutshe Bank's analysts forecast that earnings will fall 15 per cent to $4.28 per share in 2014. Problems were focused on the US where revenues fell 7 per cent year on year after several high-profile medicines lost their patents, including antipsychotic treatment Seroquel, and stomach-acid drug, Nexium. But Nexium could be given some breathing space after Ranbaxy, the Indian company that won the exclusive rights to file for a generic version of Nexium, was forced to delay its May 2014 launch after its manufacturing plant was barred from exporting to the US due to several law violations. At present, the launch could be reset to September, but analysts at broker Liberum think it is possible the US drugs regulator will revoke Ranbaxy's exclusivity rights, opening up the market to multiple versions of Nexium.