These three giants of the healthcare industry have been paying dividends for over 10 consecutive years (two of them for more than 45 years!). They also boast high five-year and one-year annual average dividend growth, and current stock prices are at or just shy of 52-week highs. It's not a bad place to be during a market that can sometimes be moody.
Now might be a good time for you, as an investor, to take a closer look at three fabulous healthcare dividend payers -- AbbVie (ABBV -0.57%), Johnson & Johnson (JNJ -2.71%), and United Health Group (UNH 2.00%) -- to add existence, or possibly revival, to your investment portfolio.
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The leader
The leader of this group, based on its current annual dividend and average one-year increase rate of its dividend, is AbbVie. The 2013 research-based biopharma is a spinoff from Abbott Laboratories, and is probably best known for its top-selling drug Humira, known to treat arthritis, Crohn's disease, and ulcerative colitis. Humira brought in $19.8 billion in revenue during 2020.
The company currently pays out a dividend of $5.20 per share annually, at a yield of 4.44%. Its average annual dividend increase is also top notch, at 28%. Basically speaking, if you started today with an initial purchase of $3,000 worth of AbbVie stock at the current price you would get 25 shares. At the current rate of a 28% annual increase, your initial investment of $3,000 would be worth $4,110 after five years, including a 15% dividend tax rate, for a gain of 36%. That is based on the per share stock price value remaining unchanged from the date of purchase.
AbbVie's stock price is also moving in the right direction, hitting a new 52-week high in the past week, a dime shy of $118. After a solid 2020 in which the company celebrated an increase in net revenue of 37%, the company is providing guidance suggesting a 17% increase in earnings per share for 2021, based on the midpoint range.
One obstacle to keep an eye on is recent negative news related to the pricing of Humira. A few lawmakers are asking the Food and Drug Administration to make an inquiry into the possibility that the company had a hand in delaying cheaper competitor products. This could actually work in investors' favor if a share price drop is short term -- it's a better buy-the-dip opportunity to get a few more shares while still enjoying an excellent dividend.
Getting better with age
Johnson & Johnson (J&J) might be seen as the older and wiser of the mammoths. Having been around for over 130 years, the company started with the first mass-produced antiseptic. In 2020, the company was still around as it is today, to help us fight coronavirus pandemic, leading to one of three primary vaccinations approved for COVID-19.
Through all of those years, J&J has not lost the idea of rewarding its shareholders. The company currently pays out a healthy dividend of $4.04 per share, equating to a 2.37% yield. The numbers are similar to those of its peers in the healthcare sector, with the average being 2.28%. And for healthcare companies in the S&P 500, J&J tops the average of 1.75%.
The only downside, if you can consider it that, is in comparing it to the other two mammoths in this group. J&J's modest 6.6% annual dividend increase amounts to the group low of a 19.88% increase over the past three years. But to its credit, the company has been increasing the payouts, so that's a good thing.
As far as stock price goes, J&J is standing toe-to-toe with the group. It's currently just short of a 52-week high, set recently. And if the 2021 outlook and results of the first quarter are any indication, the company should be in line to match the one-year target price of $187, setting up for an additional 10% gain from the current price. Add in a nice little chunk of change from dividends, and it should keep investors happy.
United we stand
The last of this group of healthcare mammoths is United Health Group (United Health). Although United Health doesn't pose a threat to the crown as the oldest of the group, it has been around as a public company for over 35 years, and can boast the largest employee base of 330,000. It offers a little more than a 22% average annual increase in dividend, for a total of 68% over three years, combined with a current annual dividend of $5.
The company's stock price is down 4% from its recent 52-week high, at a price of $408. And its P/E ratio is at a healthcare sector average of 23, while slightly lower than J&J's 29, and AbbVie's 37. With an average one-year target price of $435, the expectation is that it may have another 6% room to run.
The company is calling for an increased earnings outlook for 2021, primarily driven by higher COVID-19 treatment and testing, as well as higher than expected elective care. In 2020, elective care procedures across the U.S. declined due to the pandemic. Based on the first-quarter numbers, the company is now seeing that demand come back. The first quarter also saw revenue increase by 9% and earnings by 35% on a year-over-year basis.
Don't call it a comeback
So as healthcare workers reach toward a revival of the pre-historic mammoth, the healthcare industry has had these three dividend mammoths firmly in place for quite some time. Now might be a good time for investors to give them a spot in their portfolios as well.
