In this article, we discuss 12 defensive healthcare dividend stocks to buy now. You can skip our detailed analysis of the healthcare sector and its performance over the years, and go directly to read 5 Defensive Healthcare Dividend Stocks to Buy.
People invest in dividend stocks for several reasons. One reason is that these stocks can provide a regular source of income in the form of dividends, which are payments made by the company to its shareholders. This can be especially appealing to investors who are looking for a way to generate a steady stream of income from their investments. Additionally, dividend stocks may be seen as a safer investment compared to other types of stocks, since companies that pay dividends are often more established and financially stable. This can provide investors with some peace of mind, knowing that their investment is less likely to be impacted by market volatility or other factors. Finally, many investors view dividend stocks as a good long-term investment, since they can provide both income and the potential for capital appreciation over time. Defensive stocks are those that hold up well during periods of economic downturns. The healthcare sector is considered one of the most reliable defensive industries because these companies benefit from growing consumer demand regardless of the overall economy.
The onset of the pandemic of 2020 has shifted the dynamics of the global healthcare system. The healthcare industry in the US is the biggest in the world, which accounted for over 17% of the national GDP in 2020, according to a report by Insider Intelligence. The report also referred to the data by Deloitte and mentioned that health spending in the US will reach $8.3 trillion by 2040, up from $4 trillion in 2020.
Over the years, the healthcare industry has generated solid revenues in the US. CNBC cited data from McKinsey & Company and mentioned that the sector’s earnings are projected to grow 6% annually from 2021 through 2025, producing an additional $31 billion in profits. The same report mentioned that various healthcare companies in the US have given positive growth outlooks for the next few years. This year’s economic chaos also couldn’t target the sector as harshly as other industries. The S&P 500 Health Care index is down by 2.36% year-to-date, versus a 17.97% decline in the broader market, as of December 12. The index gained 9.6% in October, recording its best month since April 2020, as reported by Bloomberg. Another report by AllianceBernstein stated that healthcare stocks have significantly outperformed in down markets from 2000 through June 2022.
The solid performance of healthcare stocks can also be attributed to the fact that many health companies are dividend payers. Historically, dividend stocks have proved their mettle in periods of an economic clampdown. Companies like Exxon Mobil Corporation (NYSE:XOM), Kimberly-Clark Corporation (NYSE:KMB), and The Coca-Cola Company (NYSE:KO) gained investors’ attention due to their strong dividend growth track records and solid returns this year. In this article, we will further discuss defensive healthcare dividend stocks to buy.
Source: Unsplash
Our Methodology:
For this list, we selected healthcare stocks that pay regular dividends to shareholders. These companies have shown strong performance this year and have solid credentials. The stocks are ranked according to their dividend yields, as of December 12.
12. McKesson Corporation (NYSE:MCK)
Dividend Yield as of December 12: 0.58%
McKesson Corporation (NYSE:MCK) is a Texas-based company that distributes pharmaceuticals and provides healthcare management tools. In fiscal Q2 2023, the company reported revenue of $70.2 billion, which showed a 5.4% growth from the same period last year. For the first six months of the year, it generated over $166 million in operating cash flow. The company paid $139 million in dividends to shareholders during this period, which places it as one of the best dividend stocks on our list.
McKesson Corporation (NYSE:MCK) currently pays a quarterly dividend of $0.54 per share and has a dividend yield of 0.58%, as of December 12. The company has been raising its dividends consistently for the past six years. Its strong cash position makes it a good investment alongside other dividend stocks like Exxon Mobil Corporation (NYSE:XOM), Kimberly-Clark Corporation (NYSE:KMB), and The Coca-Cola Company (NYSE:KO).
Cowen appreciated the underlying business of McKesson Corporation (NYSE:MCK) in November and raised its price target on the stock to $416 with an Outperform rating on the shares.
At the end of Q3 2022, 51 hedge funds tracked by Insider Monkey owned stakes in McKesson Corporation (NYSE:MCK), up from 47 in the previous quarter. The collective value of these stakes is over $4.08 billion. With over 3 million shares, Berkshire Hathaway was the company’s leading stakeholder in Q3.
Baron Funds mentioned McKesson Corporation (NYSE:MCK) in its Q3 2022 investor letter. Here is what the firm has to say:
“McKesson Corporation (NYSE:MCK) is a leading distributor of pharmaceuticals and medical supplies. The company also provides prescription technology solutions that connect pharmacies, providers, payers, and biopharmaceutical customers. The stock price rose on solid financial results as its business is less exposed to current macroeconomic headwinds. We continue to have conviction that McKesson can grow earnings per share by an average of 12% to 14% annually and think the stock is still reasonably valued.”
11. Elevance Health Inc. (NYSE:ELV)
Dividend Yield as of December 12: 0.98%
Elevance Health Inc. (NYSE:ELV) is an American health insurance provider and also offers other medical services to its consumers. The company was previously operating as Anthem and changed its name to Elevance Health in June this year. It currently pays a quarterly dividend of $1.28 per share for a dividend yield of 0.98%, as of December 12. The company is one of the best dividend stocks on our list as it has raised its dividends for 11 years in a row.
In Q3 2022, Elevance Health Inc. (NYSE:ELV) generated $39.6 billion in revenues, up 11.5% from the same period last year. The company’s operating cash flow came in at $4.9 billion, an increase of $2.4 billion from the prior-year period. During the quarter, the company also paid $306 million to shareholders in dividends.
In October, UBS raised its price target on Elevance Health Inc. (NYSE:ELV) to $610 with a Buy rating on the shares, following the company’s Q3 earnings. The firm also mentioned that the company’s commercial book is not seeing signs of a recession.
As of the close of Q3 2022, 71 hedge funds tracked by Insider Monkey owned stakes in Elevance Health Inc. (NYSE:ELV), with a total value of over $5.3 billion.
Vulcan Value Partners mentioned Elevance Health Inc. (NYSE:ELV) in its Q3 2022 investor letter. Here is what the firm has to say:
“We purchased Elevance Health Inc. (NYSE:ELV), formerly known as Anthem. We owned Anthem for many years, up until late last year, and we are excited to own it again. The healthcare industry is complex, but we believe Elevance is well positioned to weather those challenges. Elevance is the largest healthcare insurance company in United States by medical membership, covering 47 million lives – 2/3rds of which are covered under commercial and specialty arrangements, and the other 1/3rd under government programs such as Medicare and Medicaid. The managed care industry is large, with healthcare spending of $4 trillion annually, and we believe that scale combined with expertise are important for success in this industry. We think that Elevance is one of a few large players who bring those strengths to bear. We estimate that Elevance will generate operating revenue north of $150 billion this year. Their size and scale allow for significant investments in technology and benefit design. We think that Elevance has good momentum and estimate that it should be able to grow its free-cash-flow per share at healthy rates despite the economy’s challenges.”
10. Eli Lilly and Company (NYSE:LLY)
Dividend Yield as of December 12: 1.09%
Eli Lilly and Company (NYSE:LLY) is a multinational pharmaceutical company that distributes its products to over 125 countries. In December, UBS raised its price target on the stock to $428 with a Buy rating on the shares, highlighting the company’s overall performance and its guidance for the full year.
Eli Lilly and Company (NYSE:LLY) holds one of the longest dividend records, paying regular dividends to shareholders since 1885. Moreover, it has raised its payouts consistently for the past eight years, which makes it one of the best dividend stocks on our list. The company currently offers a quarterly dividend of $0.98 per share and has a dividend yield of 1.09%, as of December 12.
Since the beginning of this year, Eli Lilly and Company (NYSE:LLY) returned 32.8% to shareholders, and its 12-month returns stood at 45.2%, as recorded on December 12.
At the end of September, 75 hedge funds in Insider Monkey’s database owned stakes in Eli Lilly and Company (NYSE:LLY), growing from 70 in the previous quarter. These stakes have a collective value of over $5.4 billion. With nearly 4 million shares, Fisher Asset Management was the company’s leading stakeholder.
ClearBridge Investments mentioned Eli Lilly and Company (NYSE:LLY) in its Q3 2022 investor letter. Here is what the firm has to say:
“In the U.S., we initiated a position in pharmaceutical maker Eli Lilly (NYSE:LLY) as it brings out new drug candidates for diabetes and Alzheimer’s disease. New drugs impact diabetes but have also demonstrated significant weight loss for patients who are overweight and have other co-morbidity issues as a result. Lilly is one of the two key players in diabetes care and we believe the potential market opportunity is much higher than the consensus forecasts as we are seeing evidence of accelerating adoption.”
9. UnitedHealth Group Incorporated (NYSE:UNH)
Dividend Yield as of December 12: 1.22%
UnitedHealth Group Incorporated (NYSE:UNH) is an American multinational healthcare and insurance company. In Q3 2022, the company reported an operating cash flow of $18.5 billion, and its adjusted free cash flow came in at $8.8 billion. In the first nine months of the year, it paid $10.5 billion to shareholders in dividends and share repurchases, coming through as one of the best dividend stocks.
UnitedHealth Group Incorporated (NYSE:UNH) has been making regular dividends to shareholders since 1990. It currently pays a quarterly dividend of $1.65 per share for a dividend yield of 1.22%, as of December 12.
Credit Suisse analyst A. J. Rice lifted his price target on UnitedHealth Group Incorporated (NYSE:UNH) to $610 with an Outperform rating on the shares.
UnitedHealth Group Incorporated (NYSE:UNH) was one of the most popular stocks among hedge funds in Q3 2022, as 110 funds tracked by Insider Monkey had positions in the company, up from 91 in the previous quarter. These stakes are collectively valued at over $10.3 billion.
Aristotle Atlantic Partners, LLC mentioned UnitedHealth Group Incorporated (NYSE:UNH) in its Q3 2022 investor letter. Here is what the firm has to say:
“UnitedHealth Group Incorporated (NYSE:UNH) is a leading U.S. health insurer offering a variety of plans and services to group and individual customers nationwide. Its health benefits segment manages health maintenance organization, preferred provider organization and point-of-service plans, as well as Medicare, Medicaid, state-funded, and supplemental vision and dental options. In addition, UnitedHealth Group’s Optum health services units—OptumHealth, OptumInsight and OptumRx—provide wellness and care management programs, financial services, information technology solutions, and pharmacy benefit management services to individuals and the health care industry. We believe UnitedHealth Group is well-positioned as a leader in commercial and government insurance markets with a broad complimentary service offering through Optum Health. As one of the largest health care payers and providers, we believe the company has unique insights and scale to continue to evolve the health care delivery process and drive above industry profitability and growth. We believe UnitedHealth Group’s track record of financial strength and stability warrants a premium in share valuation.”
8. Cigna Corporation (NYSE:CI)
Dividend Yield as of December 12: 1.35%
Cigna Corporation (NYSE:CI) is an insurance company that mainly provides healthcare insurance services to its consumers. In the past five years, the company has raised its dividend at a CAGR of 151.2% and its dividend growth streak currently stands at 2 years. It pays a quarterly dividend of $1.12 per share and has a dividend yield of 1.35%, as of December 12.
Since the start of the year, Cigna Corporation (NYSE:CI) delivered a 41.8% return to shareholders and its 12-month return came in at 54.3%, as of December 12.
In the third quarter of 2022, Cigna Corporation (NYSE:CI) reported revenue of $$45.2 billion, which showed a 2.2% growth from the same period last year. Its shareholders’ net income for the quarter came in at $2.8 billion and its adjusted income from operations stood at $1.9 billion.
In November, Morgan Stanley assumed its coverage on Cigna Corporation (NYSE:CI) with an Overweight rating and a $347 price target, up from $318. The firm mentioned that the company offers a ‘unique investment opportunity’ and appreciated its solid earnings.
The number of hedge funds tracked by Insider Monkey owning stakes in Cigna Corporation (NYSE:CI) jumped to 76 in Q3 2022, from 66 in the previous quarter. The collective value of these stakes is over $3.11 billion.
Aristotle Atlantic Partners, LLC mentioned Cigna Corporation (NYSE:CI) in its Q3 2022 investor letter. Here is what the firm has to say:
“Cigna Corporation (NYSE:CI) outperformed the S&P 500 Index in the third quarter, as the company reported what we view as solid second quarter results driven by a better-than-expected medical loss ratio. The company continues to be aggressive with share repurchases and we believe the defensive nature of Cigna’s business continues to be attractive during the ongoing macroeconomic uncertainty.”
7. CVS Health Corporation (NYSE:CVS)
Dividend Yield as of December 12: 2.16%
CVS Health Corporation (NYSE:CVS) is an American healthcare company that owns retail pharmacies and also provides healthcare insurance services to its consumers. In Q3 2022, the company reported revenue of $81.2 billion, which showed a 10% growth from the same period last year. Year-to-date, the company generated $18.1 billion in operating cash flow. During the quarter, it paid $726 million to shareholders in dividends, which makes it one of the best dividend stocks on our list.
CVS Health Corporation (NYSE:CVS) currently offers a quarterly dividend of $0.55 per share and has a dividend yield of 2.16%, as of December 12.
Morgan Stanley initiated its coverage of CVS Health Corporation (NYSE:CVS) with an Overweight rating and a $119 price target, highlighting the company’s long-term performance.
At the end of Q3 2022, 67 hedge funds tracked by Insider Monkey owned stakes in CVS Health Corporation (NYSE:CVS), up from 65 in the previous quarter. These stakes have a consolidated value of $2.1 billion.
Vltava Fund mentioned CVS Health Corporation (NYSE:CVS) in its Q3 2022 investor letter. Here is what the firm has to say:
“CVS is a leader in the provision of healthcare services in the USA. It has three main businesses: an enormous network of pharmacies, a health insurance company, and “prescription benefit management”, which is a kind of intermediary between insurance companies and pharmacies. This is the result of large acquisitions over the past 15 years – most notably of Caremark (2007) and Aetna (2018). The markets had deemed its acquisition of health insurer Aetna too expensive (and we agree), so CVS stock then fell into disfavour for a few years.
We took advantage of this in the summer of 2020 and brought the stock into our portfolio at a time when its price was pressed down still further by the coronavirus pandemic. CVS is a giant. It has revenues of USD 300 billion, making it one of the largest companies in the world. It is a relatively stable and highly profitable company with strong free cash flow. Over the past few years, CVS has focused primarily on reducing debt.
This is already much lower than it had been after the Aetna acquisition, and most of the cash is now likely to go to shareholders through share buybacks or be used for smaller acquisitions to grow the company further. CVS trades at about 11 times annual earnings, which is a very appealing valuation given the expected future growth in profitability and overall modest cyclicality in its business.”
6. Cardinal Health, Inc. (NYSE:CAH)
Dividend Yield as of December 12: 2.56%
Cardinal Health, Inc. (NYSE:CAH) provides cost-effective treatments to its consumers and also deals in other medical products. In November, Credit Suisse raised its price target on the stock to $79 with a Neutral rating on the shares, appreciating the company’s performance and balance sheet.
In fiscal Q1 2023, Cardinal Health, Inc. (NYSE:CAH) generated $49.6 billion in revenues, up 13% from the same period last year. The company had $3.5 billion available in cash and cash equivalents at the end of the quarter, and its total assets stood at over $43.3 billion.
Cardinal Health, Inc. (NYSE:CAH) is a Dividend Aristocrat as the company has been raising its dividends for the past 36 years. It currently pays a per-share dividend of $0.4957 every quarter. The stock’s dividend yield on December 12 came in at 2.56%. The company is a good addition to dividend portfolios alongside Exxon Mobil Corporation (NYSE:XOM), Kimberly-Clark Corporation (NYSE:KMB), and The Coca-Cola Company (NYSE:KO).
At the end of Q3 2022, 45 hedge funds in Insider Monkey’s database owned stakes in Cardinal Health, Inc. (NYSE:CAH), up from 44 a quarter earlier. The stakes owned by these hedge funds have a total value of over $1.03 billion.
Ariel Investments mentioned Cardinal Health, Inc. (NYSE:CAH) in its Q3 2022 investor letter. Here is what the firm has to say:
“Additionally, distributor of pharmaceutical and medical products Cardinal Health, Inc. (NYSE:CAH) advanced in the period as leadership changes were viewed to be a positive for shares. Management provided a new profit outlook for Fiscal 2023 and announced an improvement plan for the medical segment. We are encouraged by these changes and think CAH’s underlying fundamentals and competitive advantages around preventative maintenance screenings and medication management will continue to improve. We believe valuations of health care companies like CAH that focus on cost optimization and promote technological efficiency across the supply chain will be rewarded over the long term.”
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Disclosure. None. 10 Defensive Healthcare Dividend Stocks To Buy is originally published on Insider Monkey.
