This sector can make investors feel better.
The health care sector is incredibly attractive to investors for a number of reasons. Spending on health care marches perpetually higher. And the sector is quite recession-proof and divorced from many big-picture economic trends. This reliability has big appeal. And when you marry those factors with a mandate for big dividends, it adds up to a great foundation for most income portfolios. If you’re at or near retirement but not invested in health care, you should take a serious look at the lower risks and higher dividend potential of this sector. Here are nine great examples of these traits.
Meridian Bioscience (ticker: VIVO)
A diagnostic company, Meridan manufactures and markets test kits for medical labs, hospitals and urgent-care facilities. These include more commonly used tests such as those for strep throat or pregnancy detection, but also more sophisticated tests for less common infectious diseases or parasites. There is steady demand for testing services, since this is a crucial first step in most visits to a doctor. That provides for reliable revenue, and a reliable dividend from VIVO stock as a result.
Current yield: 3.3 percent
GlaxoSmithKline (GSK)
Though headquartered in the United Kingdom, GSK is similar to the typical big pharma names in the U.S. that investors recognize. You may already know some of GSK’s most popular products, including Advair prescription asthma treatment and dental products under the Sensodyne and Aquafresh brands. One material difference of being a U.K. company is that corporations there have a much more income-focused culture as part of a long history of participation in public and private pension plans. That means a mandate for dividends that individual investors in the U.S. can tap into.
Current yield: 5.3 percent
Becton, Dickinson & Co. (BDXA)
This medical device and supply company is a boring but crucial part of the global health care system. Sure, it’s not exciting to deliver boxes of syringes or bottles of antiseptic. However, these basic products are used almost everywhere. That provides a huge market and foundation for BDXA revenue. This steady stream of sales adds up to a steady dividend. Just keep in mind that there are two classes of publicly traded shares for Becton Dickinson, and these A shares are the ones with the big payout. Those that trade under the ticker BDX offer a yield that is substantially less.
Current yield: 5.1 percent
AbbVie (ABBV)
Pharma mainstay Abbott Laboratories (ABT) split up in 2013, carving off its drug-focused arm with existing cures in AbbVie and keeping its broader operations, including medical devices, research and consumer health products, under the Abbott roof. Over the last five years, ABBV has been the better bet from a share price perspective: up about 130 percent since summer 2013 while Abbott is up around 80 percent. That’s in part because of blockbusters like psoriasis treatment Humira, and a research-driven drug pipeline that continues to yield results. Those results also yield dividends for shareholders as the revenue keeps coming.
Current yield: 3.7 percent
Johnson & Johnson (JNJ)
If you’re making a list of health care dividend stocks, you have to include low-risk consumer health care play Johnson & Johnson. As one of two U.S. corporations with a AAA credit rating — tech giant Microsoft Corp. (MSFT) is the other — JNJ is as stable as they come. The health care giant generates roughly $21 billion annually in net cash flow and boasts about $30 billion in cash and investments. Those financials are impressive, but then throw in megabrands like Band-Aid bandages and Tylenol pain medication and the prospects for reliable future revenue are clear.
Current yield: 2.6 percent
Novo Nordisk (NVO)
Novo Nordisk is one of the most logical long-term investments based on current health care trends. That’s because one of the biggest health care challenges right now is the rise in diabetes. The Center for Disease Control and Prevention estimates that the percentage of Americans with diabetes has soared from about 1 percent to more than 7 percent currently. That is a disturbing trend, but also a big opportunity for Novo Nordisk, since it specializes in diabetes care and prevention. That includes insulin injection technology like “pen needles” as well as weight management products that can help at-risk patients.
Current yield: 2.9 percent
Omega Healthcare Investors (OHI)
Technically classified as a real estate investment trust, or REIT, OHI is still at its core a health care play. That’s because it focuses on financing and building skilled nursing care and senior housing facilities. This is a great business model for two reasons. The first is demographic trends that point to major growth in the number of American seniors over the coming decades. The second is Omega mainly operates triple-net lease properties, which means it’s not liable for three burdensome costs that can plague landlords: taxes, maintenance and insurance. Think of Omega as a middleman that collects the rent and pays big dividend payments, too.
Current yield: 8.2 percent
Cardinal Health (CAH)
Cardinal Health is part of the infrastructure of health care, providing medical supplies that range from slippers for patients to advanced wound care products. Its logo is likely on many items you’ll see in a hospital or physician’s office. This behind-the-scenes company may not offer incredible growth potential, as Cardinal regularly posts revenue growth in the mid-single digits. However, if you’re a low-risk income investor, it’s precisely the kind of operation you want.
Current yield: 3.6 percent
CVS Health Corp. (CVS)
If you think CVS is just a drug store, you haven’t been paying attention. After its 2006 acquisition of Caremark, CVS got deep into the pharmacy benefits business as a third-party administrator of employer-sponsored prescription plans. Add the recent $69 billion purchase of insurer Aetna last year, as well as Minute Clinics that provide urgent-care services, and it’s clear CVS is making its mark. CVS has a huge footprint that allows it to be efficient and a great brand that makes it a force to be reckoned with. And all the while it has been committed to dividends.
Current yield: 2.9 percent
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9 Health Stocks for Reliable Income originally appeared on usnews.com
