We recently compiled a list of the Retirement Stock Portfolio: 10 Healthcare Stocks to Buy. In this article, we are going to take a look at where CVS Health Corporation (NYSE:CVS) stands against the other healthcare stocks.
Healthcare stocks are widely considered a cornerstone of a retirement portfolio due to their resilience, long-term growth potential, and ability to provide steady income through dividends. This sector encompasses pharmaceutical companies, healthcare providers, biotechnology firms, and medical device manufacturers, all of which are positioned to benefit from enduring trends like aging populations and advancements in medical technology. One of the most compelling reasons to include health stocks in a retirement portfolio is their defensive nature. Health care is a necessity, not a luxury, meaning demand for medical products and services remains steady, even during economic downturns. According to a report by Morningstar, the healthcare sector outperformed the broader market in 75% of US recessions over the past 50 years, demonstrating its ability to provide stability when other sectors falter.
Read more about these developments by accessing 10 Best AI Data Center Stocks and 10 Buzzing AI Stocks According to Goldman Sachs.
Global demographic trends also favor health stocks. The United Nations projects that the number of people aged 65 and older will double by 2050, reaching 1.5 billion. This aging population will drive increased demand for chronic disease management, prescription medications, and long-term care services. The US alone spends over $4.3 trillion annually on health care, according to the Centers for Medicare & Medicaid Services, accounting for nearly 20% of GDP. This figure is expected to rise to $6.8 trillion by 2030, driven by advances in medical technology and higher spending on aging-related health issues. Health stocks, particularly those of established pharmaceutical companies, often provide attractive dividend yields, making them ideal for income-focused retirees.
Drug giants are known for consistently paying and increasing dividends. Dividends provide retirees with regular income, reducing the need to sell assets during market downturns. The healthcare sector is also at the forefront of technological innovation, offering exposure to high-growth areas such as biotechnology, precision medicine, and artificial intelligence in healthcare. Healthcare stocks provide diversification in a retirement portfolio as well, balancing out more volatile sectors like technology or energy. Additionally, healthcare ETFs like the Health Care Select Sector SPDR Fund offer exposure to a wide range of companies, spreading risk while capturing growth potential. For example, Health Care Select Sector SPDR Fund has delivered a 10-year annualized return of 13.4%, outperforming many other sectors.
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For this article, we selected health stocks that have solid businesses with recurring revenue streams, reliable dividend payouts, and burgeoning growth pipelines. These stocks are also popular among hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A row of shelves in a retail pharmacy, demonstrating the variety of drugs and over-the-counter products.
CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 63
CVS Health Corporation (NYSE:CVS) provides health services in the United States. There are several aspects that make this company an attractive investment choice. First and foremost, the company has great dividend growth, with 3 consecutive years of dividend growth, surpassing the sector median of 2 years by 50%. Secondly, the company has maintained 27 consecutive years of dividend payments, exceeding the sector median of 15 years by 80%. These metrics demonstrate the company’s ability to generate profit and provide value to shareholders over an extended period. Moreover, the company has announced that all commercial prescriptions dispensed at CVS Pharmacy will be reimbursed through CVS CostVantage. This innovative approach uses a transparent formula built on the drug acquisition cost, a set markup, and a fee to reflect the quality of pharmacy services provided.
Overall CVS ranks 7th on our list of the healthcare stocks to buy. While we acknowledge the potential of CVS as an investment, our conviction lies in the belief that some stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a stock that is more promising than CVS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
