Given the huge potential of the healthcare industry, it is very tempting to peer through it for possible options if one seeks for the best places to earn dividend income. These stocks pay some of the fastest-growing dividends. I say, it is the best time to take advantage of the immense possibilities in this sector.
Health insurance leader
With 13.6% of the market share in health insurance, UnitedHealth Group Inc. (NYSE:UNH) is the largest of all healthcare providers in the U.S. The bulk of the company’s business is its Medicare, a flourishing industry in a nation where quality healthcare and longer life are expected by its citizens. UnitedHealth Group Inc. (NYSE:UNH) takes its dividend paying ability from its $80 billion annual revenues. This stock has doubled its dividend payout within the past two years. The rally in its payout started in 2010 when the company decided to pay quarterly dividends instead of just annual. During this time, the dividend swelled by 1,250%. In 2011, the annualized dividend continued to grow by 51%, and in 2012, by 30.6%. In 2012, the company’s payout ratio based on cash flow is at a healthy level of 11.45%.
UnitedHealth Group Inc. (NYSE:UNH)’s core operations continue to improve; its net operating cash flow has been stably rising, albeit, on a slower rate in 2012. In the first quarter of 2013, its revenue grew by 11.21% year-on-year, way faster than that for the same period in the past year. Likewise, it sits on a huge pile of cash; its free cash flow keeps on growing. Given this stable and improving financial position, the health insurance leader is expected to have the ability to sustain growth in its payout. One should also note its low P/E ratio (ttm) of 12.20, which is lower than the industry’s 13.80. It has a forward ratio of 10.79, and PEG ratio of only 1.11. This lower pricing level is attractive for one with a double-digit revenue growth on a quarterly basis and with EPS that is expected to grow on a double-digit in the next 5 years.
WellPoint, Inc. (NYSE:WLP)’s High Potential Value
A company that comes next to UnitedHealth Group Inc. (NYSE:UNH) in terms of market share is WellPoint, Inc. (NYSE:WLP). It has an 8.34% share in the market and rakes in over $56 billion in annual revenue. WellPoint, Inc. (NYSE:WLP) has 54 million policyholders. In terms of dividends, it just increased its quarterly payout by 30%, from only $0.2875 to $0.375 per share. The annualized payment went up by 15% in 2012. The company’s pile of cash has remained positive although it declined by about 27% in 2012. During this time, its net operating cash flow went down by about 19%.
The growth has been better lately nonetheless. Its quarterly revenue for the first quarter of 2013 grew by 14.7% year-on-year. This is a remarkable improvement from its 3.5% growth during the same period last year. In fact, the quarterly revenue growth in the end of all 4 quarters last year compiled by Ycharts.com did not even reach 4%. But the company has picked up since then. Likewise, its profit margin remains stable with respect to its performance in recent years. The payout ratio is also at a decent level of 13.4%. WellPoint, Inc. (NYSE:WLP) currently has a low valuation; its P/E ratio is at 8.94 in contrast to the industry’s 13.80, and its PEG is only 0.78. Thus, the room for appreciation in share price is undeniable. The company has also recently received bullish sentiment from investors given its strong buyback activity.