Investing in trends that are unlikely to reverse is essential to being a successful investor.
A more populous and aging global population is almost a guarantee that quality healthcare stocks will do well in the long run. Indeed, health products and services are essential to increasing life expectancy, which also reinforces the pricing power of these actions.
Here are three healthcare stocks that have proven to be reliable dividend producers, and each looks like a solid buy for this month.
With a market cap of $145 billion and operations in 150 countries, Medtronic (MDT 2.64%) is the world’s largest pure-play medical device stock.
The company’s more than 49,000 patents and more than 300 ongoing clinical trials in various treatment areas like diabetes, cardiovascular disease and neuroscience position it as the biggest beneficiary of a promising industry forecast. Rising chronic disease rates and an aging population are expected to help the global medical device industry grow by 5.5% annually, growing from $532.6 billion in 2021 to $734.4 billion in 2027.
This explains why analysts predict that Medtronic will be able to generate annual adjusted diluted earnings per share (EPS) growth of 12.2% over the next five years.
And with a dividend payout rate set at 44.5% for its fiscal year ending this month, the stock is expected to pay out single-digit annual dividend increases for the foreseeable future. Given Medtronic’s 2.4% dividend yield, which beats the market, this is a good mix of starting yield and growth potential.
At the current share price of $105, Medtronic is trading at a forward price-to-earnings ratio of just 18. This is an attractive valuation for a blue-chip stock with strong growth prospects, which makes Medtronic a solid long-term buy. investors.
The next stock to consider buying in May is AbbVie (ABVV 1.33%). AbbVie’s $270 billion market capitalization makes it the fourth largest pharmaceutical stock in the world.
Unsurprisingly, the mega-cap stock features one of the most impressive drug portfolios in the world. AbbVie’s portfolio contained 13 blockbuster drugs in 2021, including the world’s top-selling drug, Humira.
It’s easy for such a successful business to rest on its laurels. But that doesn’t seem to be what AbbVie has been doing for the past few years since it has 60 compounds in various stages of clinical development. Analysts predict that the company’s stacked drug portfolio/pipeline and growing demand for pharmaceuticals will drive annual earnings growth of 2% over the next five years.
Best of all, AbbVie is a Dividend King that offers a market crushing 3.8% dividend yield. In addition, the share’s projected payout ratio of 40.2% for 2022 leaves it room to increase its dividend before earnings in the medium term. That’s why I expect mid-to-high single-digit annual dividend growth over the next few years, which is a healthy combination of revenue and growth.
Investors can grab shares of AbbVie at $150 a share, which equates to a reasonable forward price-to-earnings (P/E) ratio of just 12.2.
The third stock to think about buying this month is humane (HUM 1.97%). The stock’s $57 billion market capitalization makes it the fifth-largest health insurer in the world.
Health care costs are steadily rising, and more and more people in the United States are turning to health insurers to assume the risks on their behalf. Along with Humana’s status as a leader in health insurance, that’s why analysts forecast annual earnings growth of 14% for the next five years.
And given that Humana’s dividend payout ratio will be below 13% in 2022, the stock has plenty of room to increase its payout in coming years. This makes up for Humana’s low starting yield of 0.7%.
Even better, shares of Humana are trading at a forward P/E ratio of 15.6. This is a more than fair valuation for a stock with weak annual earnings growth going forward, making Humana an attractive buy for long-term investors.