Health care stocks have always had a recession-proof reputation for weathering economic downturns, as aging and disease tend to perform well outside the confines of traditional business cycles. And as baby boomers continue to hit their retirement years in waves, the aging U.S. population should provide steady demand for health care services through the end of the decade.
For investors looking for the best healthy stocks, we’ve picked some Wall Street buy names that not only distribute dividends, but also have a history of increasing their shareholder payouts. Moreover, all three picks have outperformed the broader market this year, and they have a track record of beating earnings. Here’s what you need to know.
Cencora: A Diversified Farm Company with a Long Dividend History
Meet Cencora Inc. (COR), formerly AmerisourceBergen – a pharmaceutical solutions specialist that offers services in areas including pharmacy, providers, health systems, distribution and veterinary care. In 2023, this stock burnedadding more than 21% – compared to a gain of 18% for the S&P 500 Index ($SPX).
COR was beating Wall Street’s earnings estimates for four straight quarters, as growing demand for weight loss drugs helped offset a declining COVID-19 market. In the most recent quarter, Cencora reported stronger-than-expected EPS of $2.86, on an adjusted basis, while revenue of $68.92 billion also beat estimates. Looking ahead to fiscal 2025, analysts are targeting EPS growth of more than 9%, on average.
Income investors should note that COR has been paying dividends since 2002, with consistent annual increases. The forward yield of 1.03% is supported by a modest payout ratio of 16%, indicating plenty of room for future growth.
What do the analysts say? Among 12 analysts tracking the stock, the consensus rating is “moderate buy.” Nine of them shout “strong buy”, while three play it safe with a “hold rating”. The average price target of $209.58 suggests an upside potential of around 5% from current levels.
Novo Nordisk: The Weight-Loss Giant Racks Up Gains
Novo Nordisk A/S ( NVO ) surged higher on the strength of its blockbuster diabetes and weight-loss drugs, including the much-buzzed-about Wegovy. Valued at $461 billion, NVO is firmly in mega-cap stock territory. In fact, the success of Wegovy helped NVO overtake French luxury group LVMH as the most valuable company in Europe.
In 2023, this stock was stellar – not only relative to the comprehensive S&P, but even compared to the technical-focused Nasdaq Composite ($NASX). NVO is up more than 54% this year, easily outpacing the Nasdaq’s 36% rally.
The popularity of NVO’s premium drugs is reflected in its stronger-than-expected earnings. In the most recent quarter, EPS of $0.73 beat expectations, while revenue of $8.58 billion also beat the Street.
Novo Nordisk has a 5-year dividend growth rate of 10.15%, and with a payout ratio of less than 50% of earnings, there is room to grow the current dividend yield of 0.85%.
Experts love what NVO serves. Among eight analysts covering it, seven call it a “strong buy,” and one calls it a “moderate sell.” The average target price of $115.10 is about 11.4% higher than current levels.
Zoetis: Leading the Pack in Healthcare Dividends
Zoetis Inc. ( ZTS ), spun off from pharmaceutical giant Pfizer ( PFE ) about a decade ago, is a major player in the veterinary health scene, churning out drugs, vaccines and diagnostics for both farm animals and pets. This stock rolled in 2023gaining more than 23% year to date to outperform the broader market.
In its latest quarterly report, ZTS beat Wall Street estimates by reporting adjusted EPS of $1.36, even as revenue of $2.15 billion missed the mark. Analysts are targeting 10% EPS growth for this fiscal year and next, on average.
Zoetis has a five-year dividend growth rate of 25.4%, supported by a payout ratio of 27.7% – indicating ample room for the dividend to continue growing. Currently, the forward yield is 0.84%.
Experts sense the bullish atmosphere. Eleven analysts give ZTS a consensus “strong buy” rating, with 10 giving the stock their highest endorsement, and only one tempering their enthusiasm with a “moderate buy.” The average target price of $220.60, meanwhile, is a 23% premium to current levels.
Wrapping up
In conclusion, healthy dividend stocks present a compelling investment opportunity. Companies like Cencora, Novo Nordisk A/S and Zoetis offer not only stable income through dividends, but also exposure to the recession-resistant healthcare sector. For investors looking for defensive plays with upside potential, these stocks are worth watching in 2024.
At the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.