Pharmaceutical distributor AmerisourceBergen (ABC - Get Report) is one of the biggest companies of its kind. Essentially, the firm is a middleman between pharmaceutical manufacturers and healthcare providers. By dealing with non- pharmaceutical operations -- like packaging, logistics, and inventory management -- ABC's clients can focus on their higher-margin core businesses.
Ultimately, AmerisourceBergen operates in a scale business. The overwhelming majority of hospitals, doctors' offices, and smaller pharmacies will never have the scale to handle their own drug distribution as efficiently as ABC can. For that reason, the firm operates in a business with big barriers to entry, even if margins aren't particularly compelling. ABC is all about volume.AmerisourceBergen sports a net cash position on its balance sheet, a rarity for a business with thin margins and big scale costs. That dry powder (and a consistently huge source of free cash flows) should help to boost ABC's dividend payout in 2012. Currently, the firm offers investors a 13-cent quarterly dividend.