5 Large-Cap Health Care Stocks Maintain Positive One-Year Returns Despite Economic Downturn
By: Ned Piplovic,
Despite a significant economic downturn and a stock market pullback, a few large-cap companies in the Health Care sector managed to hold onto their positive total returns over the trailing 12-month period.
The current economic turmoil has brought increased volatility to the markets. Amid speculations regarding tests, treatments and vaccines for the coronavirus, stocks have been on a daily rollercoaster and there seems to be no end in sight for this pattern. Some of the most volatile stocks have been from the energy and the Health Care sectors.
Double-digit one-day gains and losses were not uncommon for popular market indices, such as the Dow 30, NASDAQ and S&P 500. Individual stocks fluctuate even more with triple-digit percentage gains occurring daily. However, most of these stock’s share prices declined back to previous levels as quickly as they surged.
For instance, the share price of IMAC Holdings, Inc. (NASDAQ:IMAC) surged more than 1,000% between two subsequent trading sessions. The share price had been riding a downtrend and had lost more than 90% of its value between its peak of nearly $5.50 in early-April 2019 and its closing price of just $0.44 at the end of trading on March 23, 2020.
However, an announcement that the company has implemented a new telehealth option drove the share price to open above $2.00 on March 24 and climb to $3.40 with just 30 minutes left in the trading day. However, if a 675% gain above the previous day’s closing was not enough, the share price surged an additional 45% from that level before the closing bell. At the end of trading on March 24, 2020, the IMAC share price closed at $4.95 for a 1,025% gain above the previous day’s closing level.
However, the speculative surge did not hold. The following day, the share price opened 37% lower at $3.14 and has been declining steadily since then. After another decline on April 1, the share price has fallen to close at $1.69, or 66% below the recent peak of $4.95 just eight days ago. Despite the substantial pullback after the surge, the stock still delivered gains of 284% since the beginning of last week. While this volatility pattern might be attractive for day-traders who can stomach the extreme risk levels, long-term risk-averse investors will generally stay away from stocks like IMAC, which was founded in 2020, has a market capitalization of approximately $17 million and does not distribute any dividends.
Therefore, investors with long-term horizon strategies are more likely to consider stocks with higher levels of stability like the five equities below as the foundation of their long-term portfolio strategy. These equities have a market capitalization in excess of $10 billion, have paid dividends for decades and have boosted their annual dividend payout for at least the past 10 consecutive years.
Despite the recent triple-digit percentage share price surge, IMAC holdings delivered a total one-year loss of nearly 60% to its shareholders. However, the five stocks listed below still managed to deliver positive total returns over the trailing 12 months. The five equities below are sorted in ascending order by their current one-year total return.
5 Large-Cap Health Care Stocks Maintain Positive One-Year Returns: #5
Medtronic PLC (NYSE:MDT)
Founded in 1949 and headquartered in Dublin, Ireland, Medtronic develops, manufactures and distributes medical equipment, surgical instruments, sutures, drug delivery systems, insulin pumps and other consumables. It also provides continuous glucose monitoring systems, web-based therapy management software solutions and many other health care products.
Medtronic has boosted its regular dividend distribution amount every year since paying its first quarterly dividend in July 1977. In addition to its long record of dividend hikes, Medtronic’s dividend is also quite resilient to market and share price fluctuations. During the 2008 financial crisis, most equities suspended or reduced their dividend distributions. However, Medtronic delivered its highest quarterly dividend hike thus far by boosting its payout amount by 50% for the July 2008 distribution.
Since instituting dividend distributions in 1977, Medtronic has delivered 42 consecutive annual dividend hikes. Just over the past two decades, Medtronic has enhanced its annual dividend amount more than 14-fold for an average growth rate of more than 14% per year.
The most recent boost raised the quarterly dividend by 8% from $0.50 to $0.54. This new payout amount is equivalent to a $2.08 annualized payout and a 2.6% forward yield. The share price recovered some of its recent losses over the last week and is nearly even with its level from one year ago. However, dividend distributions were able to offset the small shortage and deliver a 1.4% total return over the past year.
5 Large-Cap Health Care Stocks Maintain Positive One-Year Returns: #4
Cardinal Health, Inc. (NYSE:CAH)
Headquartered in Dublin, Ohio, and founded in 1979, Cardinal Health, Inc. operates as a integrated health care services and products company. The company provides customized solutions for hospitals, health care systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician’s offices through two primary business segments — Medical and Pharmaceutical.
Cardinal Health began distributing dividends in 1983 and has hiked its annual payout for the past 34 consecutive years. The most recent of Cardinal Health’s annual dividend hikes occurred for the July 2019 dividend distribution. The quarterly payout amount advanced 1% from $0.4763 to $0.481. This new quarterly dividend distribution is equivalent to a $1.9244 annualized amount and a 4% forward dividend yield. The current yield is one-third higher than the company’s own five-year average of 3%.
Cardinal Health has enhanced its annual dividend amount more than 34-fold since 1999. This advancement pace is equivalent to an average growth rate of almost 20% per year. Over the past week, the share price has recovered more than a third of its losses since its 52-week high in late-February. With the share price virtually flat, dividend payouts accounted for the entire 4% total return over the trailing 12 months.
5 Large-Cap Health Care Stocks Maintain Positive One-Year Returns: #3
AmerisourceBergen Corporation (NYSE:ABC)
Headquartered in Chesterbrook, Pennsylvania, and founded in 1985, AmerisourceBergen Corporation sources and distributes brand-name and generic pharmaceuticals, as well as over-the-counter health care products, supplies and equipment to various health care providers, including acute care hospitals and health systems, retail and mail-order pharmacies, medical clinics and other customers.
AmerisourceBergen’s current $0.42 quarterly dividend payout marks a 5% boost over the previous period’s $0.40 distribution amount. The current quarterly payout converts to a $1.68 annualized amount and yields 1.9%. This yield outperformed AmerisourceBergen’s own 1.71% five-year yield average by nearly 14%.
After a slow growth in the first few years, after introducing dividends in 2001, AmerisourceBergen ramped-up its dividend hikes to an average annual growth rate of more than 30% over the past 15 years. Even discounting several large annual jumps at the beginning of the current streak, the company still maintained an average dividend growth rate of more than 17% per year.
The combined total return from asset appreciation and dividend distributions was more than 13% over the trailing one-year period.
5 Large-Cap Health Care Stocks Maintain Positive One-Year Returns: #2
McKesson Corporation (NYSE:MCK)
Headquartered in Irving, Texas, and founded in 1833, the McKesson Corporation provides pharmaceuticals and medical supplies through three segments: U.S. Pharmaceutical and Specialty Solutions, European Pharmaceutical Solutions and Medical-Surgical Solutions.
The $0.41 second-quarter 2020 dividend payout amount is more than 5% higher than the $0.39 distribution from the same period last year. The current quarterly payout is equivalent to a $1.64 annualized distribution and a 1.2% forward dividend yield. This yield is more than 25% above the company’s own 0.97% five-year average.
McKesson has been paying dividends since 1995 and has hiked its annual payout amount for the past 13 consecutive years. Over that period, the company enhanced its total annual dividend distribution nearly seven-fold, which is equivalent to an average growth rate of nearly 17% per year.
Despite losing nearly half of its value since its all-time high in mid-2015, the share price has gained nearly 20% since the beginning of last year. Including dividend payouts over the past 12 months, the equity delivered a total one-year return of nearly 17%.
5 Large-Cap Health Care Stocks Maintain Positive One-Year Returns: #1
Bristol-Myers Squibb Company (NYSE:BMY)
Founded in 1887, and headquartered in New York City, the Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, markets and distributes biopharmaceutical products worldwide.
Bristol-Myers Squibb’s current $0.45 quarterly payout is nearly 10% higher than the $0.41 dividend from last year. This new quarterly amount corresponds to a $1.80 annualized payout and a 3.3% forward dividend yield, which is almost 17% higher than the company’s own 2.81% average yield over the past five years.
The company has been paying dividends since 1900 and cut its annual dividend amount most recently in 2000. The most recent year that the company failed to raise its dividend was 2009. Since then, the company enhanced its annual dividend amount at an average growth rate of 3.4% per year and increased its total annual payout 45% over the past 11 years.
Despite declining nearly 20% from its 52-week high in late-January 2020, BMY still managed to deliver asset appreciation of nearly 17% over the past year. These capital gains combined with the 3.3% dividend yield for a total return of more than 20% over the trailing 12-month period.
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