Healthy Returns from Healthcare Favorites

04/14/2020 5:00 am EST

Focus: HEALTHCARE

Ned Piplovic

Assistant Editor, Eagle Financial Publications

Despite a significant economic downturn and a stock market pullback, a few large-cap companies in the healthcare sector managed to hold onto their positive total returns over the trailing 12-month period, observes Ned Piplovic, income expert and editor of DividendInvestor.

The five stocks listed below still managed to deliver positive total returns over the trailing 12 months:

Medtronic PLC (MDT)

Founded in 1949 and headquartered in Dublin, Ireland, Medtronic develops, manufactures and distributes medical equipment, surgical instruments, sutures, drug delivery systems, insulin pumps and other consumables.

Medtronic has boosted its regular dividend distribution amount every year since paying its first quarterly dividend in July 1977. In addition to its long record of dividend hikes, Medtronic’s dividend is also quite resilient to market and share price fluctuations.

During the 2008 financial crisis, most equities suspended or reduced their dividend distributions. However, Medtronic delivered its highest quarterly dividend hike thus far by boosting its payout amount by 50% for the July 2008 distribution.

Since instituting dividend distributions in 1977, Medtronic has delivered 42 consecutive annual dividend hikes. Just over the past two decades, Medtronic has enhanced its annual dividend amount more than 14-fold for an average growth rate of more than 14% per year.

The most recent boost raised the quarterly dividend by 8% from $0.50 to $0.54. This new payout amount is equivalent to a $2.08 annualized payout and a 2.6% forward yield.

Cardinal Health, Inc. (CAH)

Headquartered in Dublin, Ohio, and founded in 1979, Cardinal Health, Inc. provides customized solutions for hospitals, health care systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician’s offices.

Cardinal Health began distributing dividends in 1983 and has hiked its annual payout for the past 34 consecutive years. The most recent of Cardinal Health’s annual dividend hikes occurred for the July 2019 dividend distribution.

The quarterly payout amount advanced 1% from $0.4763 to $0.481. This new quarterly dividend distribution is equivalent to a $1.9244 annualized amount and a 4% forward dividend yield. The current yield is one-third higher than the company’s own five-year average of 3%.

Cardinal Health has enhanced its annual dividend amount more than 34-fold since 1999. This advancement pace is equivalent to an average growth rate of almost 20% per year.

AmerisourceBergen Corporation (ABC)

Headquartered in Chesterbrook, Pennsylvania, and founded in 1985, AmerisourceBergen sources and distributes brand-name and generic pharmaceuticals to various health care providers, including acute care hospitals and health systems, retail and mail-order pharmacies, medical clinics and other customers.

Its current $0.42 quarterly dividend payout marks a 5% boost over the previous period’s $0.40 distribution amount. The current quarterly payout converts to a $1.68 annualized amount and yields 1.9%. This yield outperformed AmerisourceBergen’s own 1.71% five-year yield average by nearly 14%.

After introducing dividends in 2001, AmerisourceBergen ramped-up its dividend hikes to an average annual growth rate of more than 30% over the past 15 years.

Even discounting several large annual jumps at the beginning of the current streak, the company still maintained an average dividend growth rate of more than 17% per year. 

McKesson Corporation (MCK)

Headquartered in Irving, Texas, and founded in 1833, the McKesson Corporation provides pharmaceuticals and medical supplies. The $0.41 second-quarter 2020 dividend payout amount is more than 5% higher than the $0.39 distribution from the same period last year.

The current quarterly payout is equivalent to a $1.64 annualized distribution and a 1.2% forward dividend yield. This yield is more than 25% above the company’s own 0.97% five-year average. McKesson has been paying dividends since 1995 and has hiked its annual payout amount for the past 13 consecutive years.

Over that period, the company enhanced its total annual dividend distribution nearly seven-fold, which is equivalent to an average growth rate of nearly 17% per year.

Despite losing nearly half of its value since its all-time high in mid-2015, the share price has gained nearly 20% since the beginning of last year. Including dividend payouts over the past 12 months, the equity delivered a total one-year return of nearly 17%.

Bristol-Myers Squibb Company (BMY)

Founded in 1887, and headquartered in New York City, the Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, markets and distributes biopharmaceutical products worldwide.

Bristol-Myers Squibb’s current $0.45 quarterly payout is nearly 10% higher than the $0.41 dividend from last year. This new quarterly amount corresponds to a $1.80 annualized payout and a 3.3% forward dividend yield, which is almost 17% higher than the company’s own 2.81% average yield over the past five years.

The company has been paying dividends since 1900 and cut its annual dividend amount most recently in 2000. The most recent year that the company failed to raise its dividend was 2009. Since then, the company enhanced its annual dividend amount at an average growth rate of 3.4% per year and increased its total annual payout 45% over the past 11 years.

Despite declining nearly 20% from its 52-week high in late-January 2020, BMY still managed to deliver asset appreciation of nearly 17% over the past year. These capital gains combined with the 3.3% dividend yield for a total return of more than 20% over the trailing 12-month period.

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