Out of hundreds of healthcare stocks that are trading on the U.S stock market, we have selected the top 75 healthcare dividend stocks to invest in. These companies pay dividends, which shows that they have a strong financial position. In addition, all stocks are backed by hedge funds that we track at Insider Monkey.
Investing in the healthcare sector is an almost certain way to boost one’s returns. The healthcare sector includes many industries that can be suitable for investors of various risk profiles. The sector includes companies like hospital REITs, which have high dividend yields, pharmaceutical companies, medical equipment companies, biotech companies, and health insurance companies, among others. All of these industries allow investors to diversify their portfolios and seek out either companies with solid track records of profitability for safer long-term investments, or new companies that are working on innovative and promising products that have the potential to become disruptors in their market.
Currently, the prospects for the U.S healthcare sector are very optimistic. There has been an increase in medical spending that came with the aging population, as well as increasing rates of obesity and diabetes. The developments in the drug industry have led to more people being able to live longer with chronic diseases. Possible future changes in legislation are expected to benefit health insurance companies through tax cuts, even though they will also lose some customers. The government has yet to unveil its plans regarding drug pricing legislation, which was a big issue during last year’s election campaign, but the consensus on the Street is that the changes won’t have a big effect on pharmaceutical companies.
Investing in the healthcare sector requires some understanding of the underlying factors that affect stock prices. For example, pharmaceutical companies spend most of their money on research and development of new products, so it is important to figure out the profitability of a potential new drug, as well as the probability that the drug will prove effective in trials. In the case of insurance companies, an investor has to analyze a company’s underwriting skills (how it manages risk) and the medical cost ratio, which compares the healthcare cost with the premium revenue.
In this way, picking the most suitable healthcare companies can be a tedious process that requires a lot of research. One way to simplify this is to invest in ETFs that focus on healthcare stocks. Some healthcare-focused ETFs have been doing pretty well lately, with the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) up by 20% year-to-date, and the Health Care SPDR (ETF) (NYSEARCA:XLV) up by 16%.
Suggested article: Best Healthcare Stocks: Billionaire Seth Klarman’s Picks
However, if an investor wants to have more control over their portfolio and invest in individual stocks, a good approach to the selection process is to look at the hedge fund sentiment towards a stock. That’s what we do at Insider Monkey and our strategy has gained over 45% since February 2016 (see more details).
With this in mind, let’s take a look at the top 75 healthcare dividend stocks to invest in, based on their popularity among the hedge funds we track.