Two Health Care Stocks Income Investors Can Buy Now

Slow And Steady Wins The Race

Investors looking to avoid the risk of hype-driven markets would do well to consider the healthcare sector. While the market is chasing after pandemic winners, at the risk of getting in too late, income investors can rely on the steady earnings growth and investor returns offered by the sector.

Even with the rebound underway, most S&P 500 sectors are still looking at negative earnings growth for 2020. The outlook for the Healthcare sector has not only stayed positive the entire time, but it has also been rising over the past couple of months. Now sitting at 4.6% for the year, earnings growth is expected to accelerate to 14% in 2021 and that is real acceleration, not a function of this year’s massive declines.

Medtronic Is High-Yield Growth Stock

Medtronic (NYSE:MDT) was not expected to have a great quarter and no wonder. The company makes and sells device-based medical treatments and no one was having surgery or getting elective procedures during the shutdowns. That’s why the company’s second-quarter figures are so surprising. The company beat on the top and bottom lines proving demand is still present and COVID did little to hurt the outlook.

Topline revenue fell from last year by 13.1% but this was much better than expected, 2000% bais points better than expected, and strength carried through to the bottom line. Adjusted EPS of $0.62 beat by $0.44 while GAAP EPS of $0.36 beat by $0.62 and negated an expected loss for the quarter. That’s good news because Medtronic is growing, pays a nice dividend, and has a reputation as a dividend-grower. With shares trading at $102 the stock yields just over 2.25%.

The pandemic may have curtailed sales at the point of use but did nothing to curtail plans. Year-to-date, the company spent just over a billion dollars on three acquisitions that will drive growth in the next 12 calendar months. At the same time, the company has had 18 new products approved for use assuring organic growth as well. Looking at the balance sheet, this company carries low amounts of debt and mountains of cash so no worries from that quarter.

Premier, Inc, Growth, And Dividends Are In The Forecast

Premier, Inc (NASDAQ:PINC) is a healthcare middleman providing supply chain and member services to healthcare providers nationwide. Operating as a GPO or Group Purchasing Organization it helps healthcare providers control costs by leveraging their purchasing power. The 2nd quarter results show an impact from the pandemic but, as with Medtronic, the impact was less than expected and the rebound is already underway.

The revenue for the fiscal 4th quarter came in at $342.8 million and 900 basis points above consensus. To put that in perspective, $342.8 million is worth 8.4% of YOY growth compared to an expectation for flat or slightly lower revenue. The bottom-line results were not quite as good but that doesn’t matter. The $0.58 adjusted is only $0.03 below consensus and more than enough to keep the dividend safe.

Regarding the dividend, Premier Inc. announced its first quarterly dividend just a couple of weeks ago. The payout annualizes to $0.76 or 2.75% and there is room for growth. The payout ratio is a low 32% and plenty of free-cash-flow is available.

“With our consistent, strong cash flow generation and solid balance sheet, we expect to have ample liquidity to return capital to stockholders while continuing to invest in the business to drive long-term growth and value-creation,” said Craig McKasson, Premier’s Chief Administrative and Financial Officer.