As a refresher, my focus in this and all subsequent articles will be on identifying fairly valued dividend growth stocks within each of the 10 general sectors that can be utilized to fund and support retirement portfolios. Therefore, when I am finished, the individual investor interested in designing their own retirement portfolio should find an ample number of selections to properly diversify a dividend growth portfolio with.
This article will look for undervalued and fairly valued individual companies within the general sector 35-Health Care. Within this general sector, there are several subsectors, which I list as follows:
Since I am such a stickler for valuation, I am not willing to pay more for even the best company than I believe it is worth, based on fundamental values. Consequently, several of the best-of-breed health care companies were cut from my list based either on overvaluation, a lack of available estimates, or in some cases, negative estimates.
The primary dividend stalwarts that I’ve excluded based on what I’ve stated above are listed in alphabetical order as follows:
AmerisourceBergen Corp. (NYSE:ABC), AstraZeneca plc (ADR) (NYSE:AZN), Becton, Dickinson and Co. (NYSE:BDX), Bristol Myers Squibb Co. (NYSE:BMY), Eli Lilly & Co. (NYSE:LLY), Novartis AG (ADR) (NYSE:NVS), Owens & Minor, Inc. (NYSE:OMI), Patterson Companies, Inc. (NASDAQ:PDCO), Sanofi SA (ADR) (NYSE:SNY), STERIS Corp (NYSE:STE).
Aggressive Health Care Sector Portfolio
My screen produced eight aggressive health care dividend paying stocks that I felt were worthy of further scrutiny based on current valuation. The following portfolio review lists them in alphabetical order. There are many reasons why I classify these as aggressive over conservative. For example, it could be based on size, short histories of profitability, the natures of their businesses, etc.
Questcor Pharmaceuticals Inc (NASDAQ:QCOR)
My featured selection from the aggressive portfolio of Health Care sector companies is Questcor Pharmaceuticals Inc (NASDAQ:QCOR). I chose this company because it provides characteristics and benefits that might satisfy the total return investor as well as the income-oriented dividend growth investor. Furthermore, the company operates as a biopharmaceutical focused on profitable niche markets. The following description is taken directly from their website:
“We are a biopharmaceutical company focused on the treatment of patients with serious, difficult-to-treat autoimmune and inflammatory disorders. Our efforts are currently focused on the fields of neurology, nephrology and rheumatology, areas of medicine which have significant unmet medical needs.
Our main product is H.P Acthar® Gel (repository corticotropin injection), a naturally-derived formulation of adrenocorticotropic hormones used in a variety of disorders having an inflammatory component.
We are currently supporting research in a number of rare conditions, where there is significant unmet need for treatment alternatives to standard therapies. We are also actively supporting research efforts to better understand disease processes and therapeutic mechanisms of action in conditions where Acthar might potentially play a role in treatment.”
The following Earnings and Price Correlated FAST Graph reveals the opportunity behind Questcor Pharmaceuticals Inc (NASDAQ:QCOR). Earnings growth has averaged 39.7% (the slope and P/E ratio of the orange line) and the company has commenced paying a dividend since December 2012, as depicted by the light blue shaded area. Clearly, the historical operating results have been nothing short of spectacular and the company currently offers an above-market dividend yield of 2.1%. Furthermore, a 2.7 billion-dollar market cap leaves plenty of room for future growth, and the 8% debt to capital ratio implies healthy financial shape.
