Updated on September 22nd, 2022 by Bob Ciura
The healthcare sector is a great place to find high-quality dividend growth stocks. For evidence of this, look no further than the list of Dividend Aristocrats.
The Dividend Aristocrats are a select group of 64 stocks in the S&P 500 Index, with at least 25 consecutive years of dividend increases. There are currently 7 Dividend Aristocrats that come from the health care sector.
The healthcare sector has a long-term growth catalyst going forward, which is aging populations around the world. Healthcare spending in many developed countries is likely to grow over the long term as a result.
With this in mind, we’ve compiled a list of over 200 healthcare stocks (along with important investing metrics like price-to-earnings ratios and dividend yields) which you can download below:
It is easy to see why health care stocks make for excellent long-term investments. The U.S. health care sector widely enjoys high profitability with strong cash flows. After all, people often cannot go without health care, even in difficult economic climates.
For investors interested in high-quality dividend growth stocks, this article will discuss the top 7 dividend-paying health care stocks to buy now.
Table Of Contents
The 7 best health care stocks are listed below in order of total expected returns over the next 5 years, from lowest to highest. You can instantly jump to any individual stock analysis by clicking on the links below:
- Health Care Stock #7: GlaxoSmithKline ADR (GSK)
- Health Care Stock #6: Viatris Inc. (VTRS)
- Health Care Stock #5: Fresenius Medical Care AG (FMS)
- Health Care Stock #4: Pfizer Inc. (PFE)
- Health Care Stock #3: Baxter International (BAX)
- Health Care Stock #2: Royalty Pharma (RPRX)
- Health Care Stock #1: Sanofi SA (SNY)
Health Care Stock #7: GlaxoSmithKline ADR (GSK)
- 5-year expected annual returns: 16.2%
GlaxoSmithKline develops, manufactures and markets healthcare products in the areas of pharmaceuticals, vaccines, and consumer products. GlaxoSmithKline’s pharmaceutical offerings address the following disease categories: central nervous system, cardiovascular, respiratory and immune-inflation. The company generates about $35 billion in annual sales.
On July 18th, 2022, GlaxoSmithKline announced that the company had completed the spinoff of it its consumer healthcare business into Haleon PLC (HLN). Haleon is expected to generate 4% to 6% organic growth annually.
On July 27th, 2022, GlaxoSmithKline reported second quarter results for the period ending June 30th, 2022. All figures are listed in U.S. dollars and in constant exchange rates. For the quarter, revenue grew 19% while adjusted earnings-pershare were up 23%.
Excluding Covid-19 related products, the Pharmaceutical division grew 10% for the quarter, led by strength in new and specialty products, which improved 35%. Respiratory grew 4% as strength in Trelegy was offset by weakness in Advair/Seretide. Revenue for HIV products was higher by 7% due to strong demand in Dovato and Juluca. Established Pharmaceuticals grew 2%. Vaccines were higher by 3% due to strength in Shingrix sales.
GlaxoSmithKline raised its outlook for 2022 as well, with the company now expecting sales growth of 6% to 8%, up from 5% to 7% previously. Earnings-per-share are now expected to be $3.10 per ADR share this year.
Click here to download our most recent Sure Analysis report on GlaxoSmithKline (preview of page 1 of 3 shown below):
Health Care Stock #6: Viatris Inc. (VTRS)
- 5-year expected annual returns: 16.5%
Viatris is a global healthcare company formed in November 2020 from a merger between Mylan and Pfizers’ UpJohn Business unit. The company offers a wide range of treatments and operates within three business segments called Brands, Complex Gx & Biosilimiars, and Generics. The brand segment is driven by well-known products such as Viagra and Dymista.
In addition, Viatris makes generic versions of branded drugs once patent and other exclusives expire. These medications share the same formula but cost less than “brand” medicine. Finally, Viatris offers a portfolio of diverse global biosimilars franchises, with approximately 150 marketing authorizations in over 85 countries focused on oncology, immunology, endocrinology, ophthalmology, and dermatology.
Source: Investor Presentation
The company released second-quarter 2022 results on August 8th, 2022. Viatris reported net sales of $4.1 billion, which is down 10% compared to the last year due to a decline in sales in developed and emerging markets. Complex generics and biosimilars grew 11% compared to the second quarter of 2021 due to the Semglee launch in U.S.
Viatris is performing better than expected with its brand segment with products such as Lipitor and Effexor driving sales. The company has decided to sell its biosimilars business to Biocon Biologics for $3.3 billion, with $2 billion paid in cash and $1 billion in convertible preferred equity, giving the company a 12.9% stake in Biocon Biologics. The transaction is expected to close in the second half of 2022.
Click here to download our most recent Sure Analysis report on Viatris (preview of page 1 of 3 shown below):
Health Care Stock #5: Fresenius Medical Care (FMS))
- 5-year expected annual returns: 17.2%
Fresenius Medical Care AG is a diversified healthcare corporation focused on products and services related to renal (kidney) diseases. The company’s services include kidney dialysis, clinical laboratory testing, and kidney diagnostic procedures. Fresenius Medical is headquartered in Germany. United States investors can initiate an ownership stake in Fresenius Medical through American Depository Receipts. Two ADR shares equals one share of the underlying company.
Fresenius has a diversified healthcare portfolio.
Source: Investor Presentation
On July 28th, 2022, Fresenius Medical announced second quarter results for the period ending June 30th, 2022. Organic revenue was flat for the quarter. In constant currency, revenue was up 2% while adjusted operating income fell 15%. Revenue for Health Care Services was flat organically as gains were made by acquisitions. Health Care Products grew 1% as in-center disposables were only partially offset by weaker sales of acute cardiopulmonary products.
North America organic sales were down 2% (down 1% at constant currency) due to lower demand for in-center disposables and machines for chronic treatment. EMEA increased 6% (up 7% at constant currency) while Asia-Pacific was higher by 2% (up 2% at constant currency) due to strength in Health Care Services. Latin America grew 17% (up 16% at constant currency) due to strength in Health Care Services. The company ended the year with 4,163 dialysis clinics (up 0.2% sequentially) and 346K patients (up 0.6% quarter-over-quarter).
Due to global inflation and headwinds in the U.S. labor market, the company withdrew its long-term targets.
Click here to download our most recent Sure Analysis report on Fresenius (preview of page 1 of 3 shown below):
Health Care Stock #4: Pfizer Inc. (PFE)
- 5-year expected annual returns: 17.3%
Pfizer Inc. is a global pharmaceutical company that focuses on prescription drugs and vaccines. The stock has a market capitalization of $250 billion, making Pfizer a mega-cap stock.
Pfizer’s new CEO completed a series of transactions significantly altering the company structure and strategy. Pfizer formed the GSK Consumer Healthcare Joint Venture in 2019 with GlaxoSmithKline plc (GSK), which includes Pfizer’s over-the-counter business. Pfizer owns 32% of the JV. Pfizer spun off its Upjohn segment and merged it with Mylan forming Viatris for its off patent, branded and generic medicines in 2020.
Pfizer’s top products are Eliquis, Ibrance, Prevnar 13, Enebrel (international), Sutent, Xtandi, Vyndaqel/ Vyndamax, Inlyta, Xeljanz, and Comiranty. Pfizer had revenue of $81.3B in 2021.
Pfizer reported excellent Q2 2022 results on July 28th, 2022.
Source: Investor Presentation
Company-wide revenue rose 47% and adjusted diluted earnings per share rose 92% on a year-over-year basis. Pfizer maintained revenue guidance at $98B – $102B and raised adjusted diluted EPS guidance to $6.30 – $6.45 for 2022.
Pfizer is a Kevin O’Leary dividend stock.
Click here to download our most recent Sure Analysis report on Pfizer (preview of page 1 of 3 shown below):
Health Care Stock #3: Baxter International (BAX)
- 5-year expected annual returns: 17.7%
Baxter International develops and sells a variety of healthcare products, including biological products, medical devices, and connected care devices used to monitor patients. Its products are used in hospitals, kidney dialysis centers, nursing homes, doctors’ offices, and for patients at home under physician supervision.
On July 28th, 2022, Baxter International reported Q2 2022 results for the period ending June 30th, 2022. These results weren’t very positive – the company missed consensus revenue estimates by a wide margin and slashed adjusted earnings guidance.
Source: Investor Presentation
For the quarter, the company reported adjusted diluted earnings-per-share of $0.87, which represented a year-over-year increase of 9%. Baxter reported a 21% total sales growth when including the Hillrom acquisition, but a more real 3% sales growth when excluding the Hillrom acquisition.
We are forecasting $4.18 in 2022 earnings-per-share, driven by a full year of results from the Hillrom acquisition, and in addition, we are forecasting a 10% growth rate in earnings-per-share and dividends over the next five years.
Click here to download our most recent Sure Analysis report on Baxter (preview of page 1 of 3 shown below):
Health Care Stock #2: Royalty Pharma (RPRX))
- 5-year expected annual returns: 18.0%
Royalty Pharma plc owns biopharmaceutical royalties and funds innovation in the biopharmaceutical industry in the U.S. The company’s portfolio holds royalties on roughly 35 marketed therapies and 10 development-stage product candidates, addressing areas such as rare disease, cancer, neurology, infectious disease, hematology, and diabetes.
Some of Royalty Pharma’s royalties entitle them to payments linked to the top-line sales of some leading therapies, such as AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, Gildea’s Trodelvy, Merck’s Januvia and Novartis’ Promacta, plus many more.
Source: Investor Presentation
On August 4th, 2022, Royalty Pharma reported Q2 2022 results for the period ending June 30th, 2022. The company saw adjusted earnings-per-share of $0.79, which beat analyst estimates by a cent and represented a year-over-year improvement of 11.3%. Revenue fell 3.4% year-over-year to $536 million – but this decline still beat management’s estimates by $2.1 million.
As a holding of Berkshire Hathaway (BRK.A)(BRK.B), Royalty Pharma is a Warren Buffett stock.
Click here to download our most recent Sure Analysis report on RPRX (preview of page 1 of 3 shown below):
Health Care Stock #1: Sanofi SA (SNY)
- 5-year expected annual returns: 20.2%
Sanofi, a global pharmaceutical company. The company develops and markets a variety of therapeutic treatments and vaccines. Pharmaceuticals account for ~72% of sales, vaccines makeup ~15% of sales and consumer healthcare contributing the remainder of sales. Sanofi is truly a global leader, with a third of sales coming from the U.S., a little more than a quarter coming from Western Europe, and the remainder of sales coming from emerging markets/rest of the world. Sanofi produces annual revenues of about $43 billion.
On July 28th, 2022, Sanofi reported second quarter results for the period ending June 30th, 2022. Unless otherwise noted, all figures are listed in U.S. dollars and at constant exchange rates. Revenue declined 0.9% to $10.3 billion, but topped estimates by $256 million. The company’s earnings-per-share per ADR of $0.88 compared to $0.82 in the prior year and was $0.01 above expectations. In constant currency, revenue grew 8.1% year-over-year.
Pharmaceutical revenues were higher by 7.9% during the quarter. Oncology grew 8%. Jevtana, which treats prostate cancer that has spread to other parts of the body, remains challenged as revenue fell almost 16%.
The remainder of the portfolio, however, continues to show solid growth rates. Rare Diseases grew 5.5%, with gains in nearly all areas. Vaccine revenue was higher by 8.7% as gains in polio, travel, and booster vaccines were once again partially offset by weakness in influenza and meningitis vaccines. Consumer Healthcare was up 9.1% as strength in cough and cold, allergy, and digestive wellness were offset by non-core products.
Sanofi revised its outlook for 2022 as well. The company now expects earnings-per-share growth of approximately 15%, up from the low double-digit range previously. Currency is now expected to be a 7.5% to 8.5% tailwind to results, up from 4% to 5% previously.
Click here to download our most recent Sure Analysis report on Sanofi (preview of page 1 of 3 shown below):
There are plenty of quality dividend stocks to be found in the healthcare sector. Many large healthcare companies are highly profitable, with long-term growth up ahead due to aging populations.
Shareholders of many healthcare stocks are likely to receive dividend increases each year. These 7 healthcare stocks pay dividends to shareholders, and are reasonably valued, leading to high expected returns over the next 5 years.
The Dividend Aristocrats list is not the only way to quickly screen for stocks that regularly pay rising dividends.
- The 2022 Dividend Aristocrats List: S&P 500 stocks with 25+ years of rising dividends.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 45 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.