Investors backing HealthCare Royalty Trust when it debuts on the Main Market later this month should expect a 6% dividend yield.

The company will use the £200 million it intends to raise from the initial public offering (IPO) to buy the royalties from 10 pharmaceutical treatments.

This seed portfolio offers consistent and visible cash flows, generating around $75 million (£53.7 million) in revenue a year from infertility, pain and HIV treatments among others.

This includes royalty streams from drugs sold by the likes of Pfizer (PFE:NYSE) and GlaxoSmithKline (GSK).

Returns are based on pharmaceutical sales and not company profits. In the medium term the trust targets a net total return of at least 10% a year.

The trust is being managed by US outfit HealthCare Royalty Management, which has been investing in the sector for more than a decade and has some $3 billion of committed capital.

In the healthcare industry, drug companies are increasingly opting to buy licenses for drug products from others rather than spend billions of their own cash on research and development. A number of these products are already making money and generating royalties.

The trust will either buy an interest in the licensing agreement, or provide debt financing or funding capital in return for a stream of cash flow payments.

This alternative use of royalty funding is becoming more common, with healthcare royalty transactions estimated to have grown at a compound annual growth rate of 26% over the last 15 years according to HealthCare Royalty.

The trust is expected to start trading on the stock market on 23 March. Some 15% of the IPO’s proceeds will be left after the initial acquisition and will be used to add additional assets to the portfolio.

Looks very interesting. Get ready to buy on day one.