There might not be a better place to find winning stocks that can slowly make you wealthy over decades than the healthcare industry. It's an evergreen, multitrillion-dollar market that promotes growth and innovation because better healthcare saves lives.
If you want to know which healthcare companies to choose to invest in, the answer is easy: Look for those that keep raising dividends. It's not a sure thing, but it's an excellent litmus test because a company must continually innovate, grow, and manage itself well to afford to give more cash to its shareholders every year.
These three companies are healthcare leaders. They treat their shareholders well and offer promising growth prospects at attractive valuations. Consider buying them in 2025 to boost your dividend portfolio.
1. Medtronic
You won't explore the healthcare field for long before encountering Medtronic (MDT 3.52%). The company develops numerous products, devices, and treatment technologies for dozens of conditions. Its product portfolio ranges from cardiovascular pacemaker devices to glucose monitoring systems for people with diabetes. It's a remarkably diverse and consistent business since people need care and treatment around the clock. Since the 1980s, Medtronic's sales haven't dipped more than 10% in a trailing-12-month period.
That has made it a stellar dividend stock. Medtronic isn't quite a Dividend King yet, but it soon will be. The company has paid and raised its dividend for 47 consecutive years. You can't fake or borrow your way to decades of dividend increases. Medtronic's payout ratio is still just 65% of cash flow, so you can trust that the dividend is secure and will likely keep increasing.
Medtronic isn't growing very fast, but it's positioned well for the future. The company has grown its organic revenue at a mid-single-digit rate for the past eight quarters, and analysts estimate the business will grow earnings by about 6% annually over the long term. Lastly, the stock is priced appropriately for its growth at a forward P/E ratio under 15. The stock's 3.5% dividend yield could push annualized total investment returns to 9% to 10%.
2. UnitedHealth Group
Insurance and healthcare services giant UnitedHealth Group (UNH 2.00%) is a key cog in America's healthcare system. It has grown into one of the world's largest corporations, generating over $389 billion in annual revenue. Its massive size enables it to offer more for less than its competitors, so it continues gobbling up patients' dollars in a system that spent $4.9 trillion in 2023 alone. The company operates two primary segments: UnitedHealthcare (insurance) and Optum (care services and technologies).
The company's seemingly endless growth has fueled 15 consecutive annual dividend increases, averaging 15% per increase for the past five years. Its 1.6% dividend yield isn't enormous but sustained double-digit growth creates significant income over time. Additionally, the dividend consumes only 56% of the company's cash flow. Since analysts estimate UnitedHealth will grow earnings by 15% annually over the long term, investors should reasonably expect more sizable dividend increases and share price gains.
UnitedHealth's stock declined after the insurance segment's CEO was killed in early December, igniting controversy around health insurance in the United States. Lawmakers have since introduced potential legislation to reel back the power that companies like UnitedHealth have in the industry, though it may not pass into law. The stock's recent slide has brought UnitedHealth's valuation down to a forward P/E of 17, a bargain valuation that helps compensate for the company's political risks.
3. AbbVie
Pharmaceutical company AbbVie (ABBV -0.57%) has remained a stalwart in healthcare due to its ability to innovate and find new growth opportunities. Although it was once part of Abbott Labs, AbbVie has thrived independently since its 2013 split. Today, AbbVie's drug portfolio includes immunology, oncology, cosmetics, neuroscience, and eye care treatments. The company has pivoted masterfully after losing patent protection for Humira, its former top-selling product, in 2023.
Few stocks offer a high dividend yield and strong growth, but AbbVie does. The company is also a Dividend King if you count its years with Abbott Labs, which is another impressive feat. AbbVie's stock currently yields 3.4%, and the company has raised its dividend by an average of 8% annually over the past five years. Those increases have gotten smaller these past few years, but that could change if growth ramps back up. The stock's dividend payout ratio is still manageable at 70% of cash flow.
AbbVie's stock has tumbled after its promising schizophrenia drug, the centerpiece of an $8.7 billion acquisition, failed to meet its primary endpoint in phase 2 trials. It was considered a future blockbuster for AbbVie. However, analysts still expect nearly 9% annualized earnings growth over the long term. That's enough growth to make AbbVie an easy buy at its current forward P/E ratio of less than 15.
