Top-Rated Dividend Stocks in the Health Care Industry
Aubrey is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There are good reasons why the health care industry is an investor’s haven in 2013. Rapidly ageing population of developed countries and robust economic growth of developing economies are pushing both health care expenditures and innovations to new heights. I looked at the sector's top-rated stocks, and picked those with impressive dividend record and high potential for growth. These are Novo Nordisk (NYSE: NVO), Smith & Nephew (NYSE: SNN), Span-America Medical Systems (NASDAQ: SPAN), Chemed (NYSE: CHE), and Cantel Medical (NYSE: CMN). I analyzed each stock for dividend safety, growth, and return.
Sources: Finviz.com and Nasdaq.com; as of January 15, 2013
I start off with Novo Nordisk whose high annualized dividend amount is increasing at a double-digit rate of 29.37% per year for the last 3 years. The company that develops diabetes care and hormone therapy products has an acceptable yield, at 1.44%, and a decent payout ratio of 38.01%. Investors can look forward to an estimated growth in EPS of 19.6% in the coming year based on data as of January 15, 2013. Novo Nordisk is enjoying a robust growth in revenues. In fact, the quarterly level is currently rising at 20.04% year-on-year. With these, an enviable profit margin of 27%, and a sound financial standing, who could resist this stock?
Let’s take Smith & Nephew, the medical appliances and equipment manufacturer that boosts a profit margin of 17.45% and healthy payout ratio of 25.44%. SNN’s last 3 annualized payments showed an average growth of 14.05% per year. This is impressive given its relatively high payment at $1.04 per share. Moroever, the company enjoys a debt-equity ratio of 0.02 indicating less volatility for its earnings and greater stability in its dividend payments, all else held equal. Earnings recently showed a decline of 6% but positive growth, albeit low, is expected in the coming years. The company's recent acquisition of Healthpoint Biotherapeutics should boost its advanced wound management segment, which contributes 27% of the company’s revenues based on its third quarter 2012 report. The revenue from this segment was up by 4% year-on-year which was above the industry-wide growth of 2%.
Span-America Medical Systems, meanwhile, has a dividend yield that is relatively higher at 2.52%. This fast growing manufacturer of therapeutic support surfaces and related products has a healthy payout ratio, at 31.8%. Its dividend payment has grown at a mind-blowing rate of 46% each year within the last 3 years. SPAN’s quarterly sales growth is truly impressive at 29.58% year-on-year. In fact, the EPS swelled this year by 35.85%. This growth, however, is likely to slow down to 5.91% next year. Nevertheless, it is hard to ignore SPAN because of its impressive dividend record.
Another gem in the industry is Chemed Corp., a Cincinnati-based company that provides hospice, and plumbing and drain cleaning services. Chemed’s annualized dividend payment has swelled by a remarkable 21.20% within 2010 to 2012. The company enjoys consistently increasing earnings per share. This year, EPS grew at 15.53% and is expected to further increase by 6% next year. With a low payout ratio of 14.34% and an acceptable debt-equity ratio of 0.36, Chemed provides a strong opportunity for continued stability in dividend earnings.
Last but certainly not the least, a stock that can provide safe dividend earnings is New Jersey-based Cantel Medical. CMN has recently been given a Strong Buy (#1 rank) by Zacks. Within the previous couple of years, the annualized dividend payment of the company grew by a remarkable 27%. Although this medical devices and supplies company has a low dividend yield at 0.35%, the prospect for growth is undeniable. It has a low payout ratio of 8.76%, a sound financial standing, and an EPS that is expected to balloon by 28% next year. Among the top-rated dividend stocks mentioned in this article, Cantel is one of the cheapest.
Health is wealth, indeed, if you take advantage of this industry’s imminent upsurge now. I say we pick the stocks with notable dividend records which are top-ranked and we'll do just fine.
aubrey1102 has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!