Continuing on with the dividend trend that my recent articles have been focusing upon, I’d like to now take a look at some solid healthcare companies. These companies must meet two strict criteria in that they must be profitable, and they must pay a dividend. That’s not too harsh, right? Well, away we go into the wild world of healthcare!
Major drug manufacturers
You had to guess that a healthcare article would start out with one of those big names. In my case, I went with Pfizer Inc. (NYSE:PFE). Now, there are plenty of huge names in this space and many of them pay exceptionally large dividends. There are even some foreign names that may be worth a look, such as AstraZeneca plc (ADR) (NYSE:AZN) and GlaxoSmithKline plc (ADR) (NYSE:GSK). For now though, we’re going to stick with Pfizer.
One name that everyone will be familiar with from Pfizer Inc. (NYSE:PFE) is Viagra. It’s okay, you can admit it. That’s not all this company has out there though. In addition to Viagra, there are also other name brands in Chantix, Celebrex, Lipitor, and Zoloft. That’s just naming a few, Pfizer is actually huge.
All of those medications combined added up to $59 billion in sales for fiscal year 2012. From that, Pfizer Inc. (NYSE:PFE) managed to generate some $9.5 billion in profits. It’s astonishing, isn’t it?
The one problem that drug companies tend to have is coming up with new drugs to bring to market. Drugs are patented, and they eventually run out of patent allowing the generic manufacturers to jump in and bring down the cost.
Luckily, Pfizer has quite a pipeline. As of the last update, there were 78 drugs falling into one of the four pre-market phases. In the period between November and February, Pfizer managed to bring one new drug to market, Eliquis.
Pfizer Inc. (NYSE:PFE) pays a dividend that yields 3.1%. That dividend is relatively secure, but likely won’t see too many raises as the payout ratio sits at 45%.
When it comes to growth, the next two years are looking at anywhere from 3%-5% according to analysts covering the stock.
Baxter International Inc. (NYSE:BAX) supplies hospitals with the things they need to accomplish the health services that many around the country require. Baxter provides the supplies to achieve a variety of tasks. Those tasks range from albumin therapy all the way to putting someone under general anesthesia.
Baxter managed to generate sales of more than $14 billion last year from their diversified product lineup. Sales over the last five years have been growing at a rate of around 3.98% per year.
When it comes to earnings, this medical supply juggernaut generated $2.33 billion last year. Those earnings have a five year growth rate that’s sitting at 7.16%. Future earnings growth, as projected by the analysts, is expected to be around 6.75% per year over the next two years.
Oh, hey! We’re all here for dividends aren’t we? Don’t you worry, Baxter provides investors with a dividend that yields 2.6%. That dividend has been growing over the last five years by a rate of 8.72%. There also is a little breathing room for future increases if the stock keeps its growth on track as the payout ratio is a solid 41%.
If you’ve had blood work done recently, there’s a very good chance that a company like Quest Diagnostics Inc (NYSE:DGX) put you under the microscope.
Quest Diagnostics performs a variety of tests on patients around the country. These tests could be at the choice of the patient, or at the choice of a general practitioner with something like blood work.
Performing these tests generated $7.3 billion in sales for the company in 2012. From that, Quest was able to generate around about $630 million in net income.