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5 Health Care Stocks With 36 or More Years of Dividend Increases
A Rare Feat Out of more than 600 companies in the health care space, just 80 have paid a dividend over the trailing 12 months. Even fewer raise their payout on an annual basis. A Dividend Aristocrat is a company that’s raised its annual payout at least once in each of the past 25 years. Among income-seeking investors, Dividend Aristocrats represents some of the most prized and safest investments. Within the health care sector there are just five companies which belong to this exclusive club of Dividend Aristocrats. In this case, all five have raised their payouts in at least each of the past 36 years! Let’s take a closer look at these five health care dividend divas…
Medtronic By the Numbers Graph by author, Source: Medtronic. Numbers of consecutive years Medtronic has raised its dividend: 36 Current yield: 1.8% Payout ratio: 31% Average annual dividend growth rate over the past 10 years: 14.5%
How Medtronic Grows Its Dividend Source: Steve Winton, Flickr. As announced in 2013, Medtronic’s growth comes from the realization that its cardiovascular, neuro & orthopedics, and diabetes segments offer the greatest growth opportunities. With a renewed focus in these areas the company, despite its size, plans to maintain mid-single-digit growth. New product innovation is going to be a key for Medtronic’s dividend growth. The recent introduction of the MiniMed 530G, the first artificial pancreas insulin pump, as well as its Resolute Integrity drug-eluting stent, are simply two of the numerous high-growth innovative medical devices Medtronic has up its sleeve.
Walgreen By the Numbers Graph by author, Source: Walgreen. Number of consecutive years Walgreen has raised its dividend: 38 Current yield: 1.8% Payout ratio: 43% Average annual dividend growth rate over the past 10 years: 22%
How Walgreen Grows Its Dividend One area Walgreen is expecting a sizable long-term boost is the through the Affordable Care Act. As more uninsured people purchase health insurance the thought is that this will result in more preventative care doctor visits and more prescriptions written. With competition so fierce in front-end store sales between drugstores, Walgreen’s pharmacy sales are going to be a big differentiating opportunity for the company. Acquisitions and investments could be another growth proponent. In 2012 Walgreen made a $6.7 billion investment overseas in Alliance Boots, making it the world’s first pharmacy-driven health and wellness retailer. These investments help expand its geographic reach and could continue to fuel its rapid dividend growth.
Abbott Laboratories By the Numbers Graph by author, Source: Abbott Laboratories. *=2013 figures include dividends paid out by AbbVie, which was spun-off from Abbott Labs in Jan. 2013. Number of consecutive years Abbott Laboratories has raised its dividend: 42 Current yield: 2.3% Payout ratio: 42% Average annual dividend growth over the past 10 years: 9.4%
How Abbott Laboratories Grows Its Dividend Source: Abbott Laboratories. Overseas growth opportunities represent Abbott’s greatest strength with more than 70% of its revenue coming internationally. Just this past Friday it announced the $2.9 billion purchase of CFR Pharmaceuticals to more than double its generic pharmaceutical market share in Latin America. Don’t overlook the spin-off of AbbVie, either, which allows investors better earnings visibility, and gives investors the chance to benefit from ex. U.S. growth opportunities. Diversity is also important for Abbott, with generic drugs and medical devices, as well as its nutrition and diagnostics segments all delivering more than $1.1 billion in sales in the first quarter.
Becton, Dickinson By the Numbers Graph by author, Source: Becton, Dickinson. Number of consecutive years Becton, Dickinson has raised its dividend: 42 Current yield: 1.9% Payout ratio: 43% Average annual dividend growth rate over the past 10 years: 13.8%
How Becton, Dickinson Grows Its Dividend Source: Becton, Dickinson. Not to sound like a broken record, but emerging markets and international exposure is the driving force again here. With 60% of its revenue tied derived outside the U.S. Becton, Dickinson is better able to cope with industry downturns than many of its peers. Time is another factor working in Becton, Dickinson’s favor. As a medical device and diagnostics company the assumption is that as people around the world are living longer, and as baby boomers begin to retire in the U.S., the need for personalized diagnostic and medical care is only going to increase. This would bode well toward continued dividend growth for the company as long as its spending remains under control.
Johnson & Johnson By the Numbers Graph by author, Source: Johnson & Johnson. Number of consecutive years Johnson & Johnson has raised its dividend: 52 Current yield: 2.8% Payout ratio: 50% Average annual dividend growth rate over the past 10 years: 9.4%
How Johnson & Johnson Grows Its Dividend Product and geographic diversity have played a huge role in J&J’s 52-year dividend growth streak. Having high-margin branded pharmaceuticals, medical devices, and lower-margin but inelastic consumer products, allows for predictable cash flow and incredible pricing power. Acquisitions have also played a key role. Johnson & Johnson’s $19.7 billion purchase of Synthes, which closed in 2012, will give the company significantly more exposure to faster growing emerging markets and give income investors plenty of hope for further upside in its payout.
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