11 Best Healthcare Dividend Stocks To Buy Now

Published on October 31, 2022 at 9:09 am by Hamna Asim in Hedge Funds, News

In this article, we discuss 11 best healthcare dividend stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Healthcare Dividend Stocks To Buy Now.

The healthcare industry is evolving, and new trends are emerging. These trends include artificial intelligence being increasingly used by healthcare providers, healthcare becoming more personalized in terms of precision medicines, virtual healthcare becoming mainstream, and mental health being a priority, among others.

In healthcare, biotechs are largely on the radar of investors who are on the hunt for low valuations. Some biotech companies, with new clinical data which indicates that their product is on the right path, have been able to raise funds in the market. $5.2 billion was raised in the third quarter, which was higher than the first two quarters combined. Vincent Meunier, a managing director at European investment bank Bryan Garnier & Co, told Financial Times on October 26:

“A couple of months ago, cheap was cheap but for good reasons. Now, cheap is appealing.”

Demand for dividend stocks is also rising as money managers promote stocks with a history of paying dividends to shareholders, hoping that this strategy will prove to be a safe haven for investors who face big portfolio losses from the broader market. Healthcare has been one of the most prominent S&P 500 segments with a resilient history of distributing dividends, and some of the best stocks to invest in include Abbott Laboratories (NYSE:ABT), CVS Health Corporation (NYSE:CVS), and Johnson & Johnson (NYSE:JNJ).

Our Methodology

We selected the following healthcare dividend stocks based on positive analyst coverage, strong business fundamentals, and robust dividend profiles. The dividend yields as of October 28 have been mentioned. We have assessed the hedge fund sentiment from Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022.

Photo by National Cancer Institute on Unsplash

Best Healthcare Dividend Stocks To Buy Now

11. Patterson Companies, Inc. (NASDAQ:PDCO)

Number of Hedge Fund Holders: 20

Dividend Yield as of October 28: 3.90%

Patterson Companies, Inc. (NASDAQ:PDCO) is a Minnesota-based company providing dental and animal health products in the United States, the United Kingdom, and Canada. The company offers biologicals, pharmaceuticals, vaccines, parasiticides, diagnostics, and dental equipment and services. On September 13, Patterson Companies, Inc. (NASDAQ:PDCO) declared a $0.26 per share quarterly dividend, in line with previous. The dividend is payable on November 4, to shareholders of record on October 21.

On October 17, Piper Sandler analyst Jason Bednar maintained an Overweight rating on Patterson Companies, Inc. (NASDAQ:PDCO) but lowered the firm’s price target on the shares to $35 from $40. The lower multiple is due to reduced peer group multiples, the analyst told investors in a research note.

According to the second quarter database of Insider Monkey, 20 hedge funds held stakes worth $167.70 million in Patterson Companies, Inc. (NASDAQ:PDCO), compared to 18 funds in the prior quarter worth $143.70 million. Ken Griffin’s Citadel Investment Group is the leading stakeholder of the company, with 1.6 million shares valued at $50.4 million.

Like Abbott Laboratories (NYSE:ABT), CVS Health Corporation (NYSE:CVS), and Johnson & Johnson (NYSE:JNJ), Patterson Companies, Inc. (NASDAQ:PDCO) is one of the best healthcare dividends stocks to monitor.

Here is what Heartland Advisors specifically said about Patterson Companies, Inc. (NASDAQ:PDCO) in its Q3 2022 investor letter:

“Patterson Companies, Inc. (NASDAQ:PDCO), a leading distributor of dental and animal health related products, reported first quarter results that included a sequential decline in dental equipment-related sales and price deflation in consumables. The former is in part a hangover from a strong fourth quarter while price deflation is being driven by inventory build-ups during COVID. With a healthy 4% dividend yield and attractive valuation, only 11X estimated earnings, we continue to hold Patterson. Notably too, a competitor in the dental space, Henry Schein, Inc., trades at a 1.5x+ premium to PDCO on estimated EBITDA while Covetrus, Inc., an animal health player, was acquired for 14.0x EBITDA in May.”

10. Premier, Inc. (NASDAQ:PINC)

Number of Hedge Fund Holders: 25

Dividend Yield as of October 28: 2.39%

Premier, Inc. (NASDAQ:PINC) is a North Carolina-based healthcare improvement company in the United States. The company primarily delivers medical and surgical products, pharmaceuticals, laboratory supplies, capital equipment, clinical engineering, and workforce solutions. Premier, Inc. (NASDAQ:PINC) on October 21 declared a $0.21 per share quarterly dividend. The dividend is payable on December 15, to shareholders of record on December 1. Premier, Inc. (NASDAQ:PINC) is one of the best dividend stocks to invest in.

On August 24, Benchmark analyst Bill Sutherland raised the price target on Premier, Inc. (NASDAQ:PINC) to $46 from $44 and kept a Buy rating on the shares following the company’s “constructive” FY23 guidance. The analyst was positive on Premier, Inc. (NASDAQ:PINC)’s outlook for FY23 and beyond given the high visibility of recently completed renewals of 5 to 7-year GPO contracts which drive significant free cash flow.

According to Insider Monkey’s data, 25 hedge funds were bullish on Premier, Inc. (NASDAQ:PINC) at the end of June 2022, compared to 30 funds in the last quarter. Jim Simons’ Renaissance Technologies held the leading position in the company, comprising 2.74 million shares worth $98 million.

9. Encompass Health Corporation (NYSE:EHC)

Number of Hedge Fund Holders: 34

Dividend Yield as of October 28: 1.10%

Encompass Health Corporation (NYSE:EHC) was founded in 1983 and is based in Birmingham, Alabama. The company provides facility-based and home-based post-acute healthcare services in the United States. On October 19, Encompass Health Corporation (NYSE:EHC) declared a quarterly dividend of $0.15 per share, in line with previous. The dividend is payable on January 17, 2023 to shareholders of the company as of January 3. Encompass Health Corporation (NYSE:EHC) is one of the best dividend stocks to buy now.

On October 28, Raymond James analyst John Ransom raised the price target on Encompass Health Corporation (NYSE:EHC) to $72 from $65 and maintained a Strong Buy rating on the shares. Q3 results outperformed on revenue but fell short on EBITDA, primarily due to higher de novo losses, hurricane Ian disruption, and increased labor costs, the analyst told investors.

According to Insider Monkey’s second quarter database, 34 hedge funds were long Encompass Health Corporation (NYSE:EHC), compared to 43 funds in the earlier quarter. Seth Klarman’s Baupost Group is the largest stakeholder of the company, with 2.95 million shares worth $165.3 million.

8. Baxter International Inc. (NYSE:BAX)

Number of Hedge Fund Holders: 37

Dividend Yield as of October 28: 2.11%

Baxter International Inc. (NYSE:BAX) is an Illinois-based company that develops a portfolio of healthcare products worldwide. The company offers dialysis therapies and services, intravenous therapies, infusion pumps, drug reconstitution devices, and oncology drug platforms. The company’s Q3 non-GAAP EPS of $0.82 was in-line with analyst’s estimates. The revenue of $3.8 billion climbed 17.6% year-over-year, outperforming market consensus by $30 million. Baxter International Inc. (NYSE:BAX) is one of the best dividend stocks to invest in.

On October 17, investment advisory Barclays initiated coverage of Baxter International Inc. (NYSE:BAX) with an Overweight rating and a $64 price target. Analyst Matt Miksic issued the ratings update.

Among the hedge funds tracked by Insider Monkey, Baxter International Inc. (NYSE:BAX) was part of 37 public stock portfolios at the end of June 2022, compared to 45 funds in the earlier quarter. David Blood and Al Gore’s Generation Investment Management is the leading position holder in the company, with 13 million shares valued at $836 million.

Here is what Cooper Investors has to say about Baxter International Inc. (NYSE:BAX) in its Q3 2021 investor letter:

“During the quarter we exited our position in Baxter, having originally bought in 2017 as a Low Risk Turnaround with clear Stalwart attributes. In essence, the core businesses were highly durable, providing life sustaining or saving medical products such as IV medication or pumps and dialysis machines.

They had been mismanaged prior to the company spinning off its biopharmaceutical business in 2015 which had generated most of Baxter’s operating profit. With a new CEO in Joe Almeida, who came with a successful track record leading another medical device company (Covidien) we identified three sources of value latency for the new standalone Baxter.

Firstly, optimizing the cost structure. Baxter was successful here – they were able to effectively double operating margins from low single digits to mid-to-high teens over a relatively short four-year period. Secondly, accelerating sales growth through a more focused R&D effort. This is inherently more difficult than cost optimisation and on this front success has been muted with only moderate impact to revenues from new product introductions. Finally, capital deployment through Baxter’s significantly under-levered balance sheet. Several smaller bolt-on acquisitions were nicely complementary to the existing portfolio, but in early September the company announced the acquisition of Hil-Rom Holdings, a medical device company with leading positions in bed systems and patient monitoring. The deal is significant at US$12.5bn in size, and exhausts all balance sheet latency in one fell swoop.

Whilst it is “EPS accretive” we believe the high single digit ROIC management are targeting over five years is most reflective of the financial merits of the deal. Put another way, despite visions of providing digital and connected healthcare (think a Baxter IV pump combined with a Hil-Rom smart bed), ultimately the combined entity will likely remain a low-to-mid-single digit grower. Baxter looks like it is getting bigger but not necessarily better.

This combination of uncertainty around the merits of the Hil-Rom acquisition and the underwhelming performance on the product development side of the business led us to conclude that the investment proposition today is less attractive relative to other opportunities.”

7. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)

Number of Hedge Fund Holders: 40

Dividend Yield as of October 28: 5.25%

Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is one of the premier healthcare dividend stocks to buy now. Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is an integrated healthcare, pharmacy, and retailer in the United States, the United Kingdom, Germany, and internationally. On October 27, the company declared a quarterly dividend of $0.48 per share. The dividend is payable on December 12, to shareholders of record on November 15. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)’s dividend yield on October 28 came in at 5.25%.

On October 25, Deutsche Bank analyst George Hill raised the price target on Walgreens Boots Alliance, Inc. (NASDAQ:WBA) to $41 from $38 and reaffirmed a Hold rating on the shares. The analyst’s core takeaway from the latest earnings call is that the speed of decline in pharmacy may have troughed and that Walgreens Boots Alliance, Inc. (NASDAQ:WBA) may be in a position to make market share gains in the pharmacy space.

According to Insider Monkey’s Q2 data, 40 hedge funds were long Walgreens Boots Alliance, Inc. (NASDAQ:WBA), compared to 38 funds in the preceding quarter. Stephen Dubois’ Camber Capital Management is a prominent stakeholder of the company, with 2.8 million shares worth $107 million.

Here is what Aristotle Capital Management Global Equity has to say about Walgreens Boots Alliance, Inc. (NASDAQ:WBA) in its Q1 2022 investor letter:

“We first invested in Walgreens Boots Alliance in early 2013. Over our holding period, Walgreens merged with U.K.-based Boots Alliance, establishing itself as a global leading retail pharmacy chain. CEO Stefano Pessina set the company on a path of pursuing strategic partnerships (as opposed to vertical integration deals) to increase store traffic and to, over time, transform the business into a neighborhood health destination around a more modern pharmacy. Using its strong FREE cash flow generation, the company ramped up its investments in technology, aiming to accelerate the digitalization of health information. Mr. Pessina was not successful, however, at turning around the firm’s U.S. retail segment and had to deal with increasing prescription drug reimbursement pressures. He stepped down as CEO in 2020, and in 2021, Roz Brewer took the reins of the firm. We admire Ms. Brewer’s impressive track record at companies that include Starbucks (NASDAQ:SBUX) and Walmart (Sam’s Club). However, given management’s decision to divest core cash-generative businesses and redeploy capital to embryonic healthcare startups, we prefer to step aside while we follow the company’s progress.”

6. Agilent Technologies, Inc. (NYSE:A)

Number of Hedge Fund Holders: 41

Dividend Yield as of October 28: 0.61%

Agilent Technologies, Inc. (NYSE:A) is a California-based company that offers application focused solutions to the life sciences, diagnostics, and applied chemical markets worldwide. Agilent Technologies, Inc. (NYSE:A) paid a quarterly dividend of $0.21 per share to shareholders on October 21. It is one of the best healthcare dividend stocks to invest in.

Credit Suisse analyst Dan Leonard on August 24 initiated coverage of Agilent Technologies, Inc. (NYSE:A) with an Outperform rating and a $165 price target. The analyst believes that the Street “underappreciates its ability to grow toward the top end of the industry in multiple macro environments.” The analyst thinks a premium multiple to its peers is appropriate for Agilent Technologies, Inc. (NYSE:A) given its swift growth prospects.

According to Insider Monkey’s data, 41 hedge funds were bullish on Agilent Technologies, Inc. (NYSE:A) at the end of June 2022, compared to 43 funds in the prior quarter. Ian Simm’s Impax Asset Management is the largest stakeholder of the company, with 4.17 million shares worth $495 million.

In addition to Abbott Laboratories (NYSE:ABT), CVS Health Corporation (NYSE:CVS), and Johnson & Johnson (NYSE:JNJ), Agilent Technologies, Inc. (NYSE:A) is one of the best dividend stocks to buy according to elite hedge funds.

Here is what Pershing Square Holdings has to say about Agilent Technologies, Inc. (NYSE:A) in its Q2 2021 investor letter:

“Our large commitment to UMG required that we raise cash from the sale of one of our other investments. In light of the high quality of companies in our portfolio, this was a difficult decision to make. Ultimately, we chose to sell Agilent, as its current share price approached our conservative estimate of intrinsic value. If we did not need the capital, we would not have sold the stock.

Agilent has been a highly successful investment since our original purchase nearly two years ago, compounded by our additional investment in the company in the Covid market decline last year. Agilent’s stock price has increased 2.2 times since our initial purchase as a result of the company’s acceleration in revenue growth and profitability.10 Agilent has been a critical supplier of technology and services to labs around the world fighting the Covid pandemic. The company’s management team led by Mike McMullen deserves enormous credit for the company’s success and for its important contribution to science and the fight against Covid for which we all should be extremely grateful.”

Click to continue reading and see 5 Best Healthcare Dividend Stocks To Buy Now.

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Published on October 30, 2024 at by Inan Dogan, PhD

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Published on November 16, 2024 at by Insider Monkey Staff

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