Four Dividend Stocks to Consider for Healthy Returns
Dr. Osman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The healthcare sector is one of the safest and most profitable sectors of all time. Most healthcare companies offer recession-resistance as there is an endless need to their products. There will always be a need for medical equipment. No matter how rough today's economic atmosphere is, the healthcare sector will not be greatly affected by it. With increases in health insurance coverage, this sector is expanding even more rapidly.
Moreover, there's a unique time for investors to consider investing in this arena. The global markets seem to be in a bullish mood since the end of May. In such a "relatively" optimistic environment, there's a quite profitable and less risky way to trade: go for recession-resistant stocks that are offering substantial dividends. Such times like now are best for putting this information to good use, of course. Therefore, I have listed the four highest-yielding large cap healthcare companies that are priced with low P/E ratios. All of the companies offer substantial yields. Here is a fundamental analysis on the top four healthcare companies offering nifty dividends.
Despite global worries, Abbott (NYSE: ABT) kept going up, returning about 20% in this year alone. You can easily understand that these kinds of companies are mostly recession-resistant. What's more, Abbott kept pushing its dividend higher in this environment. With a Beta of 0.31, Abbott is the third least-volatile stock in its industry.
Reporting impressive quarterly earnings, Abbott is a stock for your retirement portfolio. Revenue increased each of the last five years. While the price-to earnings ratio (15.8) seems a bit expensive for the company, the forward P/E ratio is estimated to be as low as 12.3. The Debt-to equity ratio is well below the industry average of 4.5. Abbott has always been a very attractive dividend stock. Buying a hormone from Action Pharma, Abbott is planning to end its dependence on Humira, its most popular product. This move will help Abbott expand its renal-care pipeline.
Bristol Myers-Squibb (NYSE: BMY) is also among my favorites. The stock underperformed its peers this year, returning -2%. Analysts estimate an earnings growth rate of only 2.8% for the next five years, which sounds quite conservative given its 28.37% EPS growth of the past five years.
The company is running at the forefront of the race against fighting cancer. It has several pipeline products that are essential for the survival of cancer patients. Thus, the company has a loyal customer base most of whom are totally dependent on the company’s products for their daily survival.
The Debt-to equity ratio of 0.5 is substantially below the industry average of 4.5. The company’s asset growth and revenue sources are quite strong. The cash flow is highly stable. Analysts' mean target price of $35.24 indicates a ~10% upside potential in the near term. Barclays has an overweight rating on the stock. Bristol Myers offers an attractive dividend yield that is supported by strong cash flow.
Johnson & Johnson
While going flat for some time, Johnson & Johnson (NYSE: JNJ) seems to put an end to this trend last month, and deserves a place on this list. The stock returned about 16% in the last 12 months. Trading only 2.5% below its 52 week high, Johnson & Johnson is likely to break in to new highs soon.
With a satisfactory dividend raise, the stock shows that is in a healthy mood. The company has a rock-solid balance sheet. As Johnson & Johnson has little exposure to Europe, it is probably one of the safest dividend payers among its peers. Johnson & Johnson is among the best dividend growth stocks in the market. The company has an amazing history of dividend increases. For a long-term play, Johnson & Johnson is great.
Merck (NYSE: MRK) gained upside momentum since June 1, returning almost 30% since then. Trading only 4% above its 52-week low, the company is also likely to power into new highs soon. Its beta is 0.62, while the stock sells at only 12 times forward earnings. With a juicy dividend of 3.65%, Merck could be a perfect bond replacement.
Blowing out all estimates, Merck’s earnings-per share has risen from $0.10 to $2.24 since December 2010. Merck used to pay 38 cents per quarter since December 2004. However, last year it raised the dividend to 42 cents per quarter. Since then it has been paying the same amount.
I always appreciate dividend increases, whether they are late or not. The company’s revenue and cash flows also look stable. However, it is worth stating that Merck is suffering from Singulair patent loss. The company also cannot be considered a dividend growth stock. Merck has not given a considerable dividend raise for most of its history. Nevertheless, its yield is substantially higher than that of government bonds.
ecofinstat has no positions in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services recommend Johnson & Johnson. 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.If you have questions about this post or the Fool’s blog network, click here for information.