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3 Healthcare Dividend Stocks to Buy

Wednesday, October 28, 2020 | Sean Sechler
3 Healthcare Dividend Stocks to Buy

Adding dividend-paying stocks in a strong industry is one of the best ways to boost your overall returns over the years. Since healthcare is one of the most important issues impacting our country today thanks to the pandemic and the upcoming election, there are some intriguing investment opportunities in the sector to check out at this time. When you look at the big picture for the next decade, the healthcare industry should benefit from trends like technological advances, a growing middle class in emerging markets, and aging generations such as baby boomers. These trends will likely lead to increased profitability for healthcare companies and in turn, provide strong gains for your portfolio.

It’s safe to say there’s a lot to like about healthcare stocks at this time. They held up extremely well during the March selloff and offer some defensive characteristics along with growth potential. Another plus is that the best healthcare stocks feature strong balance sheets that could mean dividend increases in the future. If you are interested in adding income to your portfolio with companies that perform consistently and see steady demand for their products and services, this sector is a great option.

Keep reading below to learn about 3 healthcare dividend stocks to consider buying.

Pfizer (NYSE:PFE)

The first healthcare stock on our list is Pfizer, a company that is poised to benefit from a 6% compound annual growth rate of prescription drug sales during the 2019-2024 period. It’s one of the world’s largest biopharmaceutical company with a diverse portfolio of drugs that generate steady cash flows, a strong pipeline of new drugs including 95 compounds in various clinical trial phases, and a solid dividend yield of 4% at this time. Pfizer also plans to merge its Upjohn business, which owns many of the company’s older drugs that are seeing declining sales, with a company called Mylan (NASDAQ:MYL) in Q4. That should allow the company to focus more on growth.

It’s also worth noting that Pfizer could have a major bullish catalyst on the horizon. The company reported its Q3 earnings today and mentioned that nearly 36,000 people have received a second vaccination in its COVID-19 vaccine phase 2/3 clinical trial. If the vaccine is approved by the FDA in the coming months Pfizer stock is likely to rally. This is a good pick for more conservative investors that are interested in a healthcare stock with a strong dividend yield.

Cardinal Health (NYSE:CAH)

Another dividend-paying healthcare stock that should be on investor’s radar at this time is Cardinal Health, a company that is a member of the S&P 500 and is one of the top 3 U.S. distributors of pharmaceuticals, medical-surgical supplies, and other healthcare products. The stock has not performed well this year but could be worth a look thanks to a strong dividend yield of 4.05% along with FY20 top-line growth of 5% year-over-year. It’s a company that has increased its annual dividend payout for more than 30 consecutive years, which tells investors that future payout increases are definitely in the realm of possibility.

COVID-19 has disrupted Cardinal Health’s business, as a large portion of the company’s revenue comes from medical, surgical, and lab products that are dependent on elective procedures. With that said, there is a very strong demand for personal protective equipment that the company produces, and many hospitals have seen elective procedures bounce back as the pandemic drags on. The stock is arguably trading at a discount and should remain an industry leader in the coming years due to high barriers of entry for competitors.

Quest Diagnostics (NYSE:DGX)

Quest Diagnostics is a company that provides diagnostic testing, information, and services to healthcare professionals around the world. It’s a healthcare company that is greatly benefitting from the pandemic thanks to heavy demand for COVID-19 testing, as it currently processes roughly 25% of all U.S. COVID-19 testing volumes. There’s a lot to like about the future of Quest Diagnostics, as medical technology continuously improves and could lead to more complex testing that typically provides higher profit margins for the company.

The Diagnosis for Quest Diagnostics: Strong Growth Ahead

Quest’s latest earnings release was impressive, as the company reported Q3 revenue of $2.79 billion, a year-over-year increase of 42.5%. Q3 EPS for the company as up by 164.6% from 2019 as well, confirming that Quest is doing a ton of business during the pandemic. The company also raised its FY 2020 outlook, which tells us that there could be more earnings upside in store going forward. While the dividend yield of 1.8% is lower than other stocks on our list, Quest Diagnostics stock arguably has the most upside.


Companies Mentioned in This Article

CompanyBeat the Market™ RankCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Quest Diagnostics (DGX)1.8$124.80flat1.79%15.43Hold$126.65
Cardinal Health (CAH)2.8$53.78flat3.61%16.25Buy$61.67
Pfizer (PFE)2.6$37.23flat4.08%14.77Hold$40.00
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7 Food Stocks That Are Leading Through Innovation

It might be easy to dismiss food stocks with so many restaurants still struggling to recover from the global pandemic. But food stocks are a broad category that includes not only the way food is consumed but the way it’s made. In 2020, sustainability and a focus on climate change continue to be important trends in this sector.

Another trend to look at is the ability of companies to deliver food to consumers. It’s not surprising that some of the biggest winners in the pandemic are the restaurants that already had a strong digital presence. Consumers' ability to have a contactless experience from start to finish has been a catalyst for some stocks.

Not surprisingly, those are also the trends that create an opportunity for investors looking to dabble in food stocks. As you look to resetting your portfolio for 2021, it may be time to take a bite out of some of these stocks.

With that in mind, we’ve put together this special presentation that identifies seven food stocks that you should consider adding to your portfolio. In addition to gaining exposure to this sector, some of these stocks present the opportunity for industry-beating gains.

View the "7 Food Stocks That Are Leading Through Innovation".

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