Investors love their dividends. And for good reason when you consider that they can contribute a substantial portion of your investment returns.

So when Amgen (Nasdaq: AMGN) announced its plan to offer its first dividend, you'd think investors would be popping the bubbly. Instead they sent shares down 4.4%.

Of course, investors were expecting the announcement at the company's analyst day. Imagine how much it would have fallen had Amgen not announced a plan to share its cash with investors.

The dividend, which will go into effect at the end of the second quarter, will pay out about 20% of adjusted net income. Based on the first-quarter income, that would be a dividend of $0.27 or a dividend yield of about 2%.

That's not the level of payback you can expect from big pharma like Pfizer (NYSE: PFE) or Merck (NYSE: MRK); both offer a dividend yield above 4%. But Amgen is planning on returning more of its cash through share buybacks. The board authorized a $5 billion buyback on top of the $2.2 billion it has remaining from a previous authorization.

Between buybacks and dividends, Amgen plans to use 60% of its income through 2015. Perhaps investors were a little disappointed the dividend wasn't a larger chunk of the total? The buybacks will help increase earnings per share, but a dividend offers investors more flexibility to use the cash however they choose.

The drop in Amgen's price last week may have had to do with its earnings, which it released the afternoon before, although nothing jumps out at me as being particularly surprising. In the first full quarter after its launch, Xgeva -- denosumab for cancer -- has already surpassed sales of Prolia -- denosumab for osteoporosis -- but that's to be expected; osteoporosis is a huge market, but it's a crowded field with established drugs like Eli Lilly's (NYSE: LLY) Forteo and Evista and competition from cheap generics like knockoffs of Merck's Fosamax.

Amgen is shooting for a compounded annualized EPS growth rate of 7% to 11% through 2015. If the big biotech can hit those numbers, investors won't need to worry so much about the dividend level; the capital appreciation will be more than enough to justify celebrating with some Champagne.

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