A Trio of Healthy DRIPs

01/06/2016 8:00 am EST


Jimmy Mengel

Editor, Outsider Club

Here’s a look at three long-term dividend stocks—each in the healthcare space—that I believe have the best chance of rewarding you over time. These three stocks each offer dividend investment plans, explains Jimmy Mengel, editor of The Crow’s Nest.

Abbott Labs (ABT)

Abbott manufactures and sells healthcare products worldwide. I like the company because of its rich dividend history: not only has it been rewarding shareholders with dividend payments since 1924, but it has been increasing its dividend for 44 straight years; a top-tier dividend aristocrat.

It just announced its latest quarterly dividend this month, the 368th consecutive quarterly dividend to be paid by Abbott since 1924. It currently pays out a 2.28% dividend yield.

Abbott has the leading market share in several huge categories: LASIK, cataract surgery, amino-acid diagnostics, blood screening, and more. 

I expect it to keep growing for years to come. This is a perfectly good time to start a position or pad your current one.

Johnson and Johnson (JNJ)

J&J is a blue-chip giant and the biggest healthcare products company in the world. The firm has grown its dividend for an impressive 45 years of consecutive dividend increases and a payout ratio of 55.6%.

While many of its consumer products are iconic—such as Band-Aid, Benadryl, and Neosporin—pharmaceuticals, medical devices, and diagnostics are the moneymakers.

It is also sitting on a ton of cash, which I also like for a long-term investment. It holds over $17.5 billion in net cash and investments.

It’s had a pretty rough year so far, dropping around 2.5%. But over the past ten years, it has returned 76%, and 324% over the past 20, not counting all of the dividends that would have compounded in a DRIP.

Medtronic (MDT)

Medtronic got its big break when it created the first battery-powered artificial pacemaker back in the 50s.

Today, the company is composed of six main businesses, developing and manufacturing devices and therapies to treat over 30 chronic diseases. It is now the world’s largest standalone medical device company.

Last year it went through an inversion deal, where it bought Covidien PLC—an Ireland-based company—which allowed it to move the company to Ireland, saving some serious money in corporate taxes.

Say what you will about the ethical implications of inversions, but one thing is indisputable: it will save the company bucket-loads of money.

It hiked its dividend by 25% earlier this year and has now increased its dividend for nearly 40 consecutive years. The dividend yields around 2.0%.

Medtronic has returned 106% over the past five years and a whopping 434% over the last 20. It’s a great long-term DRIP option.

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