Every corporation will face challenges and setbacks -- which will sometimes sink its stock price. That's not a good reason for long-term investors to jump ship unless, of course, there's a fundamental shift in the company's prospects.
Stocks that can perform reasonably well while maintaining a positive long-term outlook may well be worth holding onto for good. Corporations in this category are common, but they do exist; two examples are Merck (MRK -0.17%) and Medtronic (MDT -0.20%). Here's why these healthcare leaders are worth investing in.
1. Merck
Drug-making companies have an important advantage: The products they sell are always in demand. Patients don't stop taking medicines when the economy is in the dumps, nor do doctors stop prescribing them. Furthermore, there is always a need for newer, more effective therapies.
Few companies are better at developing innovative medicines than Merck. It has been doing it successfully for decades and currently has the top-selling drug in the world, Keytruda. This cancer treatment has racked up dozens of approvals and indications worldwide. Though it will lose patent exclusivity in 2028, Merck is preparing for that important cliff. It recently earned approval for Winrevair, a novel treatment for pulmonary arterial hypertension.
Its pipeline features other exciting candidates. One of them is a subcutaneous version of its crown jewel, and according to the research company Evaluate Pharma, this version of Keytruda could generate $8 billion in sales by 2030. Meanwhile, Winrevair could generate in excess of $3 billion in peak sales, according to some analysts.
Those two products won't replace Keytruda, which generated $25 billion in revenue last year. However, the pharmaceutical giant has many other candidates. Its pipeline includes more than 80 programs in phase 2 trials and more than 30 in phase 3. That's how Merck has been able to generate consistent revenue and earnings growth for a long time; expect it to continue down that path for many more years.
What about Merck's dividend? The company has increased its payouts by 75% in the past decade and currently offers a forward yield of 2.7%, compared to the S&P 500's average of 1.3%.
Merck's robust underlying business is more than strong enough to support consistent dividend growth for years, which makes it a top income stock to hold on to for a long time.
2. Medtronic
Medtronic has long been a leader in the medical-device market, and is one of the largest companies in this field by market cap. Its portfolio features dozens of products across its diabetes care, cardiovascular, "medical surgical," and neuroscience segments. Medtronic's diverse business, vast experience in navigating one of the most regulated industries around, and the reputation it's built over the years all give it significant advantages.
And although revenue growth hasn't been strong for the medical device specialist in recent years, Medtronic has plenty of growth avenues. The company is implementing changes related to artificial intelligence (AI) across its business, some of which are designed to improve product efficiency. Elsewhere, it hopes to challenge Intuitive Surgical in the large robotic-assisted surgery market thanks to its own surgical robot, the Hugo; Medtronic's Hugo has yet to earn clearance in the U.S., but it's currently being tested to that effect.
Long-term demographic changes, especially the world's aging population, will increase the demand for the kinds of products Medtronic manufactures, granting the company many more opportunities. It's just a matter of doing what the healthcare giant has done consistently for years.
That also applies to Medtronic's dividend. The company's track record here is rare: It has increased its payouts for 47 consecutive years, meaning it's inching toward Dividend King status.
Medtronic's forward yield is currently near a healthy 3.5%. Medtronic may not deliver explosive growth to investors, but it is a steady, reliable dividend-paying blue chip to park in your portfolio for good.
