5 Large-Cap Health Care Stocks with 3%-Plus Yields and Positive One-Year Total Returns
By: Ned Piplovic,
Events like the current coronavirus outbreak and an aging population are driving demand for Health Care sector products and services.
Income investors can leverage that increased demand into strong total returns by picking a few Health Care sector equities that offer a combination of high dividend yields and asset appreciation. Just over the trailing 12-month period, the five Health Care companies listed below have delivered total returns between 5% and 28% with an average one-year return of almost 18%.
A rapidly expanding market sector offers investment opportunities to astute investors who can select the best equities for their individual portfolio strategies. However, opportunities also carry risks of malfeasance and potential for significant losses. Unfortunately, the recent rise and fall of Theranos and Elizabeth Holmes could be just one indicator of a much larger underlying problem in the Health Care sector.
All investing decisions carry risk and must be justified by detailed research and analysis. Therefore, investors must conduct thorough due diligence, stock research and market analysis before making any investment decisions. In addition to strong one-year growth, a few of the five large-cap Health Care stocks below also delivered strong returns over the past five years. More importantly for income investors, these five Health Care stocks offer their investors dividend yields in excess of 3%, which is more than 50% above the average market dividend yield of just below 2%.
Furthermore, most of these stocks represent large and established companies. The smallest of the five companies has an $11.13 billion market capitalization. The largest company’s market capitalization is approaching $142 billion, for an average capitalization of nearly $80 billion. Sorted in ascending order by their current dividend yield, the list below contains five large-cap Health Care sector stocks that currently offer yields of more than 3% and positive asset appreciation over the trailing 12 months.
5 Large-Cap Health Care Stocks with 3%-Plus Yields and Positive One-Year Total Returns: #5
Cardinal Health, Inc. (NYSE:CAH)
Headquartered in Dublin, Ohio, and founded in 1979, Cardinal Health, Inc. operates as an 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. Just a few years after initiating the dividend payouts, Cardinal Health began its current streak of 34 consecutive annual dividend hikes. The most recent of Cardinal Health’s annual dividend hikes occurred for the July 2019 dividend distribution and increased the quarterly payout 1% from $0.4763 to the current $0.4811 distribution amount. This new and higher payout corresponds to a $1.9244 annualized distribution and a 3.23% forward dividend yield, which is more than 17% above the company’s own 2.75% average dividend yield over the last five years.
Over the past two decades of consecutive annual dividend hikes, Cardinal Health has enhanced its annual dividend payout amount more than 34-fold. This advancement pace corresponds to an average growth rate of 19.2% per year since 1999. While growth rates tend to diminish as the payout amount increases, Cardinal Health still managed to deliver an average annual dividend growth rate of nearly 8% over the past five years. Cardinal Health’s current dividend payout ratio of 42% is still in the sustainable range and indicates that dividend payouts are well covered by the earnings and should continue rising into the near term.
5 Large-Cap Health Care Stocks with 3%-Plus Yields and Positive One-Year Total Returns: #4
Headquartered in Paris, France, and founded in 1973, Sanofi offers general medicines, cardiovascular and diabetes medications, specialty care, vaccines and other consumer healthcare products and services. As of 2019, Sanofi had 75 manufacturing facilities in 33 countries and provided health care solutions throughout more than 170 countries around the world. Additionally, Sanofi operates four research and development (R&D) hubs in North America, Europe and Asia. In 2019, the company invested more than $6 billion in more than 80 R&D projects, which also included more than 30 projects in the final phase 3 approval stage.
Like many European companies, Sanofi distributes its dividend once per year. With the ex-dividend date in early May, the dividend pay date follows in late May or early June every year. Despite some annual dividend payout fluctuations over the past five years, the company has advanced its annual dividend payout amount more than four-fold since introducing dividend payouts in 2003. This growth pace corresponds to an average dividend growth rate of 9.3% per year.
The most recently paid dividend of $1.72 corresponds to a 3.36% forward dividend yield, which trails the company’s own five-year yield average of almost 4%. Strong share price growth drove the dividend yield below its short-term average level. The share price advanced nearly 19% higher over the past year and combined with the dividend income payout for a one-year total return over more than 25%. Shareholders also enjoyed a total return on their investments of more than 32% over the last three years.
5 Large-Cap Health Care Stocks with 3%-Plus Yields and Positive One-Year Total Returns: #3
Gilead Sciences, Inc. (NASDAQ:GILD)
Headquartered in Foster City, California, and founded in 1987, Gilead Sciences is a research-based biopharmaceutical company that discovers, develops and commercializes medicines and medical treatments. The company’s portfolio of current products and products in its development pipeline includes treatments for HIV/AIDS, liver diseases, cancer, inflammatory and respiratory diseases and cardiovascular conditions.
The company’s $0.68 first quarterly dividend payout of 2020 is almost 8% higher than the $0.63 quarterly distribution from the previous year. The new quarterly payout amount corresponds to a $2.72 annualized distribution amount and currently yields 4%. This yield is more than 40% above the company’s own 2.79% average yield over the past five years. Since beginning dividend distributions in 2015, Gilead has more than doubled its annual dividend payout, which converts to a 16% average annual growth rate.
While delivering marginal gains, the company’s share price combined with dividend income distributions for a total return of 5% over the trailing one-year period. Over the past three years, the total return exceeded 13%.
5 Large-Cap Health Care Stocks with 3%-Plus Yields and Positive One-Year Total Returns: #2
GlaxoSmithKline Plc (NYSE:GSK)
Headquartered in Brentford, United Kingdom, and tracing its founding to 1715, GlaxoSmithKline discovers, develops, manufactures and markets pharmaceutical products, vaccines, over-the-counter medicines and other health-related consumer products. The company operates through four business segments — Pharmaceuticals, Pharmaceuticals R&D, Vaccines, and Consumer Healthcare. In addition to pharmaceutical products and medication in multiple categories, the company also offers consumer healthcare products in wellness, oral health, nutrition and skin health categories under multiple brand names, including Sensodyne, Poligrip, Voltaren and Theraflu.
The company began paying dividends in 2001. With 11 annual dividend boosts in the first 15 years, the company maintained an overall rising dividend trend. Even with a slight dividend payment amount pullback over the past five years, GlaxoSmithKline still doubled its annual dividend payout amount for an average dividend growth rate of 14.4% over the past two decades.
The $0.592 second-quarter 2020 dividend payout amount is more than 20% higher than the $0.492 distribution from the previous period. The company pays varied dividend levels for each quarter and the current annual dividend projection of $2.01 converts to a 4.52% forward dividend yield. The dividend income combined with a robust asset appreciation to deliver a total return on shareholders’ investment of nearly 17% over the past year and 27% over the past three years.
5 Large-Cap Health Care Stocks with 3%-Plus Yields and Positive One-Year Total Returns: #1
AbbVie, Inc. (NYSE:ABBV)
Headquartered in North Chicago, Illinois, and founded when Abbott Labs (NYSE:ABT) divested its proprietary pharmaceutical business in 2013, AbbVie Inc. discovers, develops, manufactures and sells pharmaceutical products. The most prominent pharmaceutical brands in the company’s current portfolio are HUMIRA for the treatment of autoimmune diseases, IMBRUVICA for the treatment of patients with chronic lymphocytic leukemia and VIEKIRA PAK for the treatment of adults with hepatitis C. Additionally, AbbVie offers pharmaceutical treatments for HIV, hypothyroidism, prostate cancer, endometriosis, anemia, Parkinson’s disease and multiple sclerosis, as well as treatments for testosterone replacement therapy and pancreatic enzyme therapy for exocrine pancreatic insufficiency.
The company’s current $1.18 quarterly dividend is 10.3% higher than the $1.07 payout from the last period of 2019. This new quarterly payout corresponds to a $4.72 annualized distribution and a 4.92% forward dividend yield, which is 24% higher than the 3.96% five-year average yield.
Continuing a multi-decade streak of annual dividend boosts, AbbVie has hiked its dividend payout every year since divesting from Abbott Labs six years ago. During this period, AbbVie tripled its total annual payout amount, which is equivalent to an average annual growth rate of nearly 17%.
The share price ascended more than 20% over the trailing 12 months to merge with the high-yield dividend for a total one-year return of nearly 26%. Additionally, AbbVie delivered a 77% total return over the last three years. Lastly, the company’s shareholders almost doubled their investment with a 97% total return over the last five years.
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