Healthcare Dividend Stocks in a Nutshell
- Healthcare companies are much more than just a few large pharmaceutical companies.
- Medical devices, distribution, and healthcare services are quite attractive from a dividend investing perspective.
- Many companies in this sector enjoy strong demographic tailwinds.
- Here’s the Healthcare dividend stocks list.
It’s not a secret, but baby boomers have been and still are an important part of the development of our society. As the years go by, they will become the largest generation to ever hit the “golden age”. This means the healthcare industry should benefit from an unprecedent tailwind. While Drug Manufacturer (market cap over $2T) and Biotechnology ($1.25T+) are the most important sub-sectors, we believe there will be growth across all the other segments such as Diagnostics & Research, Healthcare Plans, Medical Devices, Medical Care, Medical Distribution and Medical Instruments & Supplies.
This article explores this sector, defines how it can boost yields in your portfolio, and provides you with a complete dividend stock lists including comprehensive metrics.
The Healthcare Sector Explained
We often mention that we would rather be healthy than wealthy. This implies the cost of good health is priceless. This sounds like a very good business to be in! In addition to new drug discoveries, there are significant amounts of money to be made in care and diagnostics.
To be competitive in this industry, companies must use their size to benefit from a strong distribution network and economies of scale. Most healthcare enterprises must provide an important budgetary commitment to research & development activities. From their drug pipeline or new diagnostic devices, their future constantly depends on new developments from those research expenditures.
The healthcare sector often sees stock surges both upward and downward based upon the results of their discoveries. Patents and regulations are part of their daily routine. Care should be exercised to not trade in this sector purely on the hope of a new technology breakthrough.
What Healthcare Stocks Can Do For Dividend Investors?
The advantage for dividend investors in this sector is the wide choice of large and well-established companies. The best performing companies in this sector are often the long-term established companies that have a strong distribution network or a large drug portfolio and pipelines full of new products.
Such businesses usually have a good capacity to reward shareholders. This is how this sector counts 6 companies making the Dividend Aristocrats lists. Dividend Aristocrats are companies showing over 25 consecutive years with a dividend increase. Here’s the list of healthcare aristocrats:
- Abbott Laboratories (ABT)
- AbbVie (ABBV)
- Becton, Dickinson & Company (BDX)
- Cardinal Health (CAH)
- Johnson & Johnson (JNJ)
- Medtronic (MDT)
Unfortunately, as R&D budgets are often a huge part of a healthcare company’s expenses, there are many companies showing an erratic dividend growth track record. It is not that they will cut their payment, but you may be waiting for a few years before seeing a pay check raise.
Healthcare Dividend Stocks List
Below you will find the Healthcare Dividend Stock list. We’ve published a short version as a table on this page, but you can download the full version including several metrics right here:
[table id=48 /]
This table is updated once a year, but we have an updated stocks list with additional metrics for you to download:
Here are the metrics I’ve used to build the Healthcare list:
- Dividend yield between 1.5% and 10% (I want stocks that pay dividend)
- 5-year revenue growth positive (I want growing businesses in my portfolio)
- 5-year normalized diluted EPS growth positive (growing earnings leads to more dividend growth)
- 5-year dividend growth positive (I want management committed to make me richer)
- 3-year dividend growth positive (management must not sleep on the job)
- Payout ratio under 100% (I want those dividends to keep coming)
The Healthcare Dividend Stocks list is being updated on a quarterly basis.
Healthcare Sector Special Characteristics
For all drug manufacturers (major, generic or specialty), biotech, diagnostics and research companies, most of their budget goes to R&D. They must manage their pipeline of new products and their patents. A company could surf on its previous success for a decade due to their patent protecting their research. However, they must constantly renew their portfolio. This usually impacts their ability to increase their dividends in a predictable manner. Price volatility both up and down are also frequent characteristics of companies in this industry.
As for Healthcare plans, long-term care facilities, medical care and distribution companies are more likely to be affected by governmental regulations. The cost of healthcare is a major topic for governments across the world. Should it be free, sponsored or insured? This question leads to much debate and uncertainties for the future. No matter what happens, the industry will find a way to adjust their business models, but volatility will be the continuing and on-going characteristic of this sector.
Healthcare Dividend Stocks of Interest
At Dividend Stocks Rock, we have included some Healthcare stocks in our dividend portfolios. Here’s a short list of companies that are interesting buys according to our current research:
AbbVie (ABBV)
AbbVie is a spinoff from Abbott Laboratories (ABT). ABBV is a research-based specialty Biopharmaceuticals company with a broad portfolio of medicine-including leadership in immunology and virology and a pipeline of breakthrough therapies. It’s role is to discover new drugs for the purpose of curing diseases and keeping existing patents alive and functional if at all possible.
Johnson & Johnson (JNJ)
Operations are divided into 3 segments: Consumer, Pharmaceuticals and Medical Devices & Diagnostics. Pharmaceuticals represent about 40% of its revenue, and is concentrated around immunology, oncology & psoriasis drugs. JNJ has an impressive brand portfolio of personal care goods. Most of their brands are #1 or #2 in their markets, and their products are sold worldwide.
Medtronic (MDT)
Medtronic was founded in 1949 as a medical repair business. Today, Medtronic is one of the largest healthcare companies with a focus on medical technology. It primarily manufactures and sells device-based medical therapies. It operates in 4 segments Cardiac and Vascular (about a third of its business), Minimally Invasive Therapies, Restorative Therapies and Diabetes.
Abbott Laboratories (ABT)
Abbott Laboratories is a healthcare company that manufactures medical devices, blood glucose monitoring kits, nutritional healthcare products, diagnostic products and equipment, and branded generic drugs. ABT has over 130 years of history, more than 99,000 employees and operates in over 150 countries. Abbott’s reputation is very well established. The company develops products in four different segments: Diagnostics, Nutrition, Medical Devices, and Established Pharmaceuticals.
*Stock cards are updated twice a year, this is an example that is not being updated
Other DSR Dividend Stocks Lists
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