14 Best Healthcare Dividend Stocks to Buy

Published on May 24, 2023 at 9:33 am by Vardah Gill in Dividend Stocks, Hedge Funds, News

In this article, we will take a look at 14 best healthcare dividend stocks to buy. You can skip our detailed analysis of the healthcare sector and dividend stocks, and go directly to read 5 Best Healthcare Dividend Stocks to Buy.

The healthcare sector in the US encompasses a wide range of providers, facilities, and services aimed at promoting and maintaining the health of the population. The industry is also a significant and crucial part of the US economy. According to the Centers for Medicare and Medicaid Services, US healthcare spending reached $4.3 trillion in 2021 and accounted for 18.3% of the national GDP. Given this growing healthcare spending, analysts have presented a positive outlook for the sector in the coming years as well. Healthcare profit pools are projected to grow at a 4% CAGR from $654 billion in 2021 to $790 billion in 2026, as reported by McKinsey & Company.

The onset of the pandemic has brought several changes and transformations in the US healthcare system. The adoption of telehealth services accelerated post-pandemic to reduce the risks of exposure. According to a report by Deloitte, 68% of physicians offered virtual health options in 2022, compared with just 14% the prior year. The report further mentioned that 57% to 80% of patients prefer telehealth services. These shifting patient preferences are likely to have a lasting impact, resulting in the further growth of the telehealth sector. Bloomberg Intelligence (BI) estimated that the sector could bring $20 billion in US revenues by 2027. The analysis also projected a 30% annual revenue growth for top telehealth providers.

Also read: 11 Best Mid-Cap Healthcare Stocks To Buy Now

The demand for healthcare-related products and services remains relatively stable despite economic conditions. This was seen in 2022 when high-interest rates caused major indices to plunge, whereas the healthcare sector maintained a solid footing and outperformed the broader market. Healthcare stocks have historically delivered stable performance during periods of economic uncertainty. In our article titled 12 Defensive Healthcare Dividend Stocks, we mentioned that these equities have outperformed in down markets from 2000 through June 2022.

In addition to their defensive nature, dividend payments from healthcare companies are appealing to investors. Dividend stocks have demonstrated their worth during previous high inflationary periods, becoming top choices for investors. Quality healthcare companies like Johnson & Johnson (NYSE:JNJ), AbbVie Inc. (NYSE:ABBV), and Merck & Co., Inc. (NYSE:MRK) have histories of strong financial performance and consistent earnings. Their ability to regularly pay and grow their dividends compels investors to pile on these stocks. In this article, we will further take a look at the best healthcare dividend stocks to buy.

Photo by Vitaly Taranov on Unsplash

Our Methodology:

For this list, we scoured Insider Monkey’s database of 943 elite funds as of Q1 2023 to determine healthcare dividend stocks that are popular among these smart money investors. Next, we shortlisted healthcare dividend companies that have raised their payouts for at least five years and also considered the respective companies’ overall financial health. We sorted these stocks by the number of hedge funds in our database with positions in these companies at the end of Q1.

14. Cardinal Health, Inc. (NYSE:CAH)

Number of Hedge Fund Holders: 50

Cardinal Health, Inc. (NYSE:CAH) is an Ohio-based multinational healthcare services company that deals in the distribution of pharmaceuticals and other medical products. The company reported strong Q1 earnings with revenue amounting to over $50.5 billion, up 13% from the same period last year. Its operating cash flow for the quarter came in at over $1.3 billion.

On May 11, Cardinal Health, Inc. (NYSE:CAH) declared a 1% hike in its quarterly dividend to $0.5006 per share. Through this increase, the company took its dividend growth streak to 37 years, which makes it one of the best dividend stocks in the healthcare sector. The stock has a dividend yield of 2.36%, as of May 23. Johnson & Johnson (NYSE:JNJ), AbbVie Inc. (NYSE:ABBV), and Merck & Co., Inc. (NYSE:MRK) are some other popular dividend stocks from the healthcare industry.

Cardinal Health, Inc. (NYSE:CAH) attracted positive Wall Street ratings after reporting earnings beat in its most recent quarter. In May, both Deutsche Bank and UBS raised their price targets on the stocks to $90 and $93, respectively.

At the end of Q1 2023, 50 hedge funds in Insider Monkey’s database owned stakes in Cardinal Health, Inc. (NYSE:CAH), the same as in the previous quarter. The collective value of these stakes is over $1.36 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.”

13. Medtronic plc (NYSE:MDT)

Number of Hedge Fund Holders: 52

Medtronic plc (NYSE:MDT) is an American medical device company that offers services related to medical technology. The company currently offers a quarterly dividend of $0.68 per share and has a dividend yield of 3.12%, as of May 23. It is one of the best dividend stocks on our list as it maintains a 45-year streak of consistent dividend growth.

Medtronic plc (NYSE:MDT) reported a strong cash position in its fiscal Q3 2023, which shows that the company is well-positioned to grow its dividends in the future. For nine months that ended in January 2023, the company’s operating cash flow came in at over $3.5 billion and its free cash flow amounted to $2.5 billion. Moreover, it had over $4.5 billion available in cash and cash equivalents, up from $3.7 billion during the same period last year.

Medtronic plc (NYSE:MDT) was a part of 52 hedge fund portfolios at the end of Q1 2023, as per Insider Monkey’s database. The stakes owned by these elite funds have a collective value of over $1.64 billion.

Carillon Tower Advisers mentioned Medtronic plc (NYSE:MDT) in its Q4 2022 investor letter. Here is what the firm has to say:

“Medtronic plc (NYSE:MDT) announced disappointing clinical trial results for a new product in its pipeline and lowered its fiscal 2023 financial guidance due to lingering supply chain issues and slower than expected medical procedure recovery.”

12. Becton, Dickinson and Company (NYSE:BDX)

Number of Hedge Fund Holders: 56

Becton, Dickinson and Company (NYSE:BDX) is a New Jersey-based medical technology company that mainly specializes in the production of medical devices. In May, Barclays raised its price target on the stock to $284 and kept an Overweight rating on the shares, highlighting the company’s improvements in underlying growth and execution.

On April 25, Becton, Dickinson and Company (NYSE:BDX) declared a quarterly dividend of $0.91 per share, which was the same as its previous dividend. In 2022, the company hiked its dividend for the 51st consecutive year, making it one of the best dividend stocks on our list. The stock’s dividend yield on May 23 came in at 1.48%.

For the six months that ended in March 2023, Becton, Dickinson and Company (NYSE:BDX) reported an operating cash flow of $584 million. For fiscal Q2 2023, the company’s revenue came in at $4.8 billion, which showed a 1.4% growth from the same period last year.

The number of hedge funds tracked by Insider Monkey owning stakes in Becton, Dickinson and Company (NYSE:BDX) grew to 56 in Q1 2023, from 52 in the previous quarter. These stakes have a collective value of roughly $3 billion. With nearly 2 million shares, Generation Investment Management was the company’s leading stakeholder in Q1.

11. Amgen Inc. (NASDAQ:AMGN)

Number of Hedge Fund Holders: 57

Amgen Inc. (NASDAQ:AMGN) specializes in the discovery and manufacturing of innovative human therapeutics. In the first quarter of 2023, the company generated over $0.7 billion in free cash flow. The company’s operating cash flow for the quarter came in at over $1.1 billion. It also paid over $1 billion in dividends to shareholders, which makes it one of the best dividend stocks on our list.

Amgen Inc. (NASDAQ:AMGN) offers a quarterly dividend of $2.13 per share and has a dividend yield of 3.80%, as of May 23. The company has been rewarding shareholders with growing dividends since 2011.

In May, Jefferies raised its price target on Amgen Inc. (NASDAQ:AMGN) to $325 with a Buy rating on the shares, highlighting the company’s acquisition of Horizon Therapeutics.

As of the close of Q1 2023, 57 hedge funds in Insider Monkey’s database reported having stakes in Amgen Inc. (NASDAQ:AMGN), with a collective value of over $1.68 billion. Two Sigma Advisors was the company’s largest stakeholder in Q1.

10. McKesson Corporation (NYSE:MCK)

Number of Hedge Fund Holders: 60

McKesson Corporation (NYSE:MCK) is an American healthcare company that distributes pharmaceuticals and provides related services and products to its customers. On April 27, the company declared a quarterly dividend of $0.54 per share, which was in line with its previous dividend. It has been raising its dividends consistently for the past six years.

McKesson Corporation (NYSE:MCK), one of the best dividend stocks, generated $5.2 billion in operating cash flow in its FY23. The company’s free cash for the period amounted to over $4.6 billion. Its free cash flow was sufficient to cover the shareholder obligation worth $3.9 billion. The company’s revenue amounted to over $276.7 billion for the full year, up 5% from FY22.

Following the company’s strong earnings growth and updated guidance for FY24, Credit Suisse lifted its price target on the stock to $450 in May and maintained an Outperform rating on the shares.

Medtronic plc (NYSE:MDT) was a popular buy among hedge funds in Q1 2023, as 60 elite funds in Insider Monkey’s database owned stakes in the company, up from 54 in the previous quarter. The total value of these stakes is roughly $4 billion.

Broyhill Asset Management mentioned McKesson Corporation (NYSE:MCK) in its Q4 2022 investor letter. Here is what the firm has to say:

“Shares of McKesson Corporation (NYSE:MCK) gained 50% for the twelve months ending December 2022, as opioid-related litigation concerns, which weighed on the stock for years, took a back seat to strong operating performance. When we first established the position in 2018, we explained that, “Although headlines remind us daily of growing threats to the business, the actual probability of this business dramatically changing in the next five years is much lower than the perceived probability. We are simply betting that the future might not be as bad as the price suggests.”

Consensus FY22 and FY23 EPS estimates at the time were around $17 – $18 per share. The company reported ~ $24 in earnings in FY22, and is on pace for $26 in FY23, even as consensus estimates for the broader market were repeatedly revised lower. We continued to trim our position throughout the year as shares rerated higher from ~ 8x earnings in FY18 to ~ 16x earnings at recent highs.”

9. Gilead Sciences, Inc. (NASDAQ:GILD)

Number of Hedge Fund Holders: 60

Gilead Sciences, Inc. (NASDAQ:GILD) specializes in the research and development of antiviral drugs. In May, BMO Capital upgraded the stock to Outperform with a $100 price target, acknowledging the company’s cell therapy franchise. The firm also appreciated the company’s manufacturing capabilities and its tumor oncology business.

Gilead Sciences, Inc. (NASDAQ:GILD) offers a quarterly dividend of $0.75 per share and has a dividend yield of 3.82%, as of May 23. The company has been raising its dividends consistently for the past eight years. In the first quarter of 2023, it returned $969 million to shareholders in dividends, which makes it one of the best dividend stocks on our list.

At the end of Q1 2023, 60 hedge funds tracked by Insider Monkey owned stakes in Gilead Sciences, Inc. (NASDAQ:GILD), worth collectively nearly $4 billion.

Ariel Investments mentioned Gilead Sciences, Inc. (NASDAQ:GILD) in its Q4 2022 investor letter. Here is what the firm has to say:

“Biopharmaceutical company Gilead Sciences, Inc. (NASDAQ:GILD. advanced in the quarter on positive data released in a study evaluating Trodelvy versus comparative chemotherapy in patients with metastatic breast cancer. The detailed findings increased investor confidence the drug would receive incremental approvals for a broader range of breast cancer treatments. Shares also received a boost on news the TAF patent portfolio for HIV drugs will be extended from the middle of this decade through the early 2030s, creating greater visibility into the company’s long-term opportunity in the virology market.”

8. Bristol-Myers Squibb Company (NYSE:BMY)

Number of Hedge Fund Holders: 69

Bristol-Myers Squibb Company (NYSE:BMY) is an American pharmaceutical industry company, offering innovative medical solutions to its consumers. The company is one of the best dividend stocks on our list as it maintains a 17-year streak of consistent dividend growth. It pays a quarterly dividend of $0.57 per share and has a dividend yield of 3.43%, as of May 23.

In April Credit Suisse maintained a Neutral rating on Bristol-Myers Squibb Company (NYSE:BMY) with a $72 price target, following the company’s strong Q1 earnings.

As of the close of Q1 2023, 69 hedge funds in Insider Monkey’s database reported having stakes in Bristol-Myers Squibb Company (NYSE:BMY), the same as in the previous quarter. These stakes have a consolidated value of over $1.55 billion.

7. Eli Lilly and Company (NYSE:LLY)

Number of Hedge Fund Holders: 72

Eli Lilly and Company (NYSE:LLY) is one of America’s oldest pharmaceutical companies. It is widely known for its drugs for clinical depression. In May, Morgan Stanley raised its price target on the stock to $507 and maintained an Overweight rating on the shares. The firm gave a positive outlook on the company’s drug trial for Alzheimer’s disease.

Eli Lilly and Company (NYSE:LLY), one of the best dividend stocks on our list, has been making dividend payments to shareholders for the past 138 years. Moreover, the company holds a 9-year streak of growing its dividends consistently. It currently pays a quarterly dividend of $1.13 per share for a dividend yield of 1.07%, as of May 23.

As per Insider Monkey’s Q1 2023 database, 72 hedge funds owned stakes in Eli Lilly and Company (NYSE:LLY), down from 76 in the preceding quarter. These stakes are collectively valued at over $3.7 billion.

Fred Alger Management mentioned Eli Lilly and Company (NYSE:LLY) in its Q1 2023 investor letter. Here is what the firm has to say:

“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company with core franchises in diabetes, obesity, neurology, and oncology. The company offered exposure to therapeutics in obesity and diabetes via the launch of Mounjaro, as well as in Alzheimer’s via Donanemab which was filed in November 2022 for accelerated Phase 3 approval in mid-2023. While the company reported decent fiscal fourth quarter results, shares detracted from performance after a modest miss in their obesity and diabetes drug. Mounjaro. Moreover, investors became skeptical of potential regulatory scrutiny around Donanemab and its efficacy relative to Biogen’s competing offering.”

6. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 73

Pfizer Inc. (NYSE:PFE) is an American multinational biotech and pharmaceutical company. In May, Barclays maintained a Neutral rating on the stock with a $40 price target after the company announced its Q1 earnings. The firm expressed concerns about the company’s performance due to its new launches this year.

Pfizer Inc. (NYSE:PFE), one of the best dividend stocks, currently pays a quarterly dividend of $0.41 per share and has a dividend yield of 4.14%, as of May 23. The company has raised its dividends for 13 years running. It can be a reliable investment option for income investors alongside Johnson & Johnson (NYSE:JNJ), AbbVie Inc. (NYSE:ABBV), and Merck & Co., Inc. (NYSE:MRK).

At the end of March 2023, 73 hedge funds tracked by Insider Monkey owned stakes in Pfizer Inc. (NYSE:PFE), with a collective value of roughly $2.2 billion.

Diamond Hill Capital mentioned Pfizer Inc. (NYSE:PFE) in its Q3 2022 investor letter. Here is what the firm has to say:

“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”

Click to continue reading and see 5 Best Healthcare Dividend Stocks to Buy.

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Published on May 1, 2024 at by Inan Dogan, PhD

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