Healthcare is an evergreen industry, meaning it will always be around. People will always need care, and naturally, they will strive for newer and better medicines and technologies to provide it. That idea makes healthcare a great space in which to look for dividend stocks.
Industry titans like Johnson & Johnson (JNJ 0.19%), AbbVie (ABBV -1.66%), and UnitedHealth Group (UNH -0.63%) stand out for their leadership in pharmaceuticals, medical technology, and insurance.
Want decades of dividends you can count on? Do you want companies that raise their dividends every year? Here is why you can count on each of these companies to deliver just that.
This Dividend King is on sale
Johnson & Johnson has paid and raised its dividend for 62 consecutive years, making it part of a select club called the Dividend Kings. The diversified healthcare conglomerate sells pharmaceuticals, medical devices, and various other products worldwide through its two units: Innovative Medicine and MedTech. Johnson & Johnson's strong brand and diverse products are always in demand, which is the secret to the stock's years of consistency.
Additionally, a disciplined leadership team takes excellent care of Johnson & Johnson's financials. The company is famous for having the highest credit rating available -- higher than the U.S. government's credit rating -- and it's one of just two public companies to have it. A healthy dividend payout ratio that's only 47% of Johnson & Johnson's estimated 2024 earnings keeps the dividend in check.
The stock offers a solid blend of income and growth. The starting yield is 3.3% today, and management has raised the dividend by an average of 5.7% over the past three years.
Unfortunately, lawsuits regarding Johnson & Johnson's talcum baby powder cast shadows on the stock. That's why shares trade at just 14 times earnings today, despite the company's track record and quality. The lawsuits will likely cost billions of dollars in eventual settlements, but they shouldn't threaten the dividend, since settlement payments generally pay out over many years. This could be an opportunity to buy the stock before sentiment improves once the litigation passes.
This company offers yield and dividend growth
Blockbuster pharmaceutical drugs can change a company's trajectory. AbbVie knows this well; its Humira drug spent years as the world's top-selling product. While the patent on Humira has since expired, investors can still count on the company to deliver impressive dividend payments. AbbVie is a top-tier pharmaceutical company with an impressive portfolio that includes Botox, and up-and-coming drugs that could replace what Humira loses to generic competition.
AbbVie's dividend resume is impressive. Since being spun off from Abbott Labs as its own business in 2013, the company has paid and raised its dividend every year. AbbVie is one of the rare stocks that offer both a higher starting yield and impressive dividend growth. The stock yields 3.7%, and management has raised the dividend by an average of 7.8% over the past three years. Investors can also sleep well at night holding AbbVie, thanks to a modest 55% payout ratio.
Investors can buy AbbVie and look forward to more dividend excellence. Analysts believe AbbVie will grow earnings by more than 7% annually for the next three to five years. That means management can maintain these solid increases without increasing the payout ratio. AbbVie's ability to continue growing through pipeline changes is a good sign that the stock will be a winner for years to come.
This giant is a pillar of America's lucrative healthcare system
UnitedHealth is one of the world's largest healthcare companies and a core pillar of America's healthcare system. The healthcare conglomerate offers insurance, care, and technology solutions to a staggeringly large customer base of over 170 million people, 270,000 employers, 1.7 million physicians, and 6,400 hospitals. UnitedHealth generates $380 billion in annual revenue! Its size highlights its role in healthcare and gives it a competitive edge because UnitedHealth can deliver products and services at cheaper prices than its smaller competitors.
Want dividend growth? UnitedHealth has it in spades. The company has paid and raised its dividend for 15 consecutive years. Its 1.7% starting yield won't wow you, but dividend increases have averaged over 16% for the past five years. That's due to consistent double-digit revenue growth as UnitedHealth gobbles up market share in America's $4.5 trillion healthcare system.
UnitedHealth is becoming a massive business, which could make growth harder over the coming years. Still, it doesn't look like growth will fall off a cliff anytime soon. Analysts believe UnitedHealth will grow earnings by an average of more than 12% annually for the next three to five years. Plus, the payout ratio is just 30%, meaning investors could enjoy double-digit dividend raises for a long time.
