This Under-the-Radar Healthcare Stock Yields Nearly 8.5%. Here's Whether That Income Is Too Good to Be True.
Perrigo makes private-label over-the-counter drugs, which sounds like a reliable business, but there are warning signs to consider before you buy it.
Overview
Perrigo (NYSE: PRGO) sounds like it should have a highly consistent business. But recent performance has been weak. And the CEO just abruptly left, leaving a temporary CEO in place as the company looks for a replacement. There's a reason why the stock yields 8.3% today. And before you jump on that yield, thinking you've found a great income opportunity, you should consider the risks you are taking on. Here's a quick list.
Perrigo makes over-the-counter drugs. It owns some of its own brands, but the real business is making private-label generic drugs. For example, if you don't want to pay the full fare for Procter & Gamble's (NYSE: PG) NyQuil, you may opt for the generic version available at your store. That store doesn't own a generic drug factory; it buys generics from a third party, such as Perrigo. In theory, this should be a highly consistent consumer staples business.
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Originally published at www.fool.com.