Monday, March 9, 2020

Best Yielding Healthcare Stocks 2020 With A Lower Volatility Than The Market

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Best Yielding Healthcare Stocks 2020 With A Lower Volatility Than The Market - Our Service, High Dividend Opportunities ('HDO'), focuses on finding opportunities that provide a high level of current income- investments that provide a larger than average dividend.

We often target investments with yields over 7%, frequently these investments are immediately labeled as "high-risk", "sucker yields" or are said to be "just returning capital". Often with little more evidence than just pointing at the yield.

There is misunderstanding and a lot that is read into a high-yield. While many high-yield investments are in fact high risk, many low-yield (or zero yielding) investments are also high risk. Dividend yield alone is not a measure of risk.
Best Yielding Healthcare Stocks 2020 With A Lower Volatility Than The Market

Yields are high for a number of reasons-

  • "Pass-through" entities like REITs, BDCs or MLPs are designed to pass the majority of their profits directly to investors. This results in a much higher than average yield.
  • Capital allocation strategy- when companies have excess capital they have a variety of choices of where to allocate it. Many will buy back shares on the market, increasing share-price, others decide to increase the dividend.
  • The company is trading at a low price- yield is the annual dividend divided by the current price, so as price declines the yield goes up. So when a yield is high, it is because the company is cheap. On the other hand, when the yield is low, it is indicative of a company that is expensive. The first step of buy low/sell high, is buying low.

We choose to focus on investing in companies that distribute more capital directly to shareholders. This means we invest in a lot of pass-through corporations as well as corporations which make the capital allocation decision to prioritize dividends.

It also means that we are frequently on the lookout for companies that are trading at a low price. Naturally, companies that are "on-sale" often get there for a reason. Maybe performance has been below expectations, there are operational challenges or for some other reason, the market is bearish on the company. Just like the market frequently overcorrects to the high-side, causing "bubbles", it often overcorrects to the low-side. Stocks and sectors that are out of favor and over-react create a unique buying opportunity! This provides an opportunity for us to invest in companies when they are priced low and benefit from a high-dividend yield, plus the eventual price appreciation with recovery.
Moreover, the stock market offers investments that not only produce dividend yields that significantly exceed that average, but they also provide the income or cash flow that will allow them to maintain or increase dividends over time. Here are five stocks in five different industries that fit that description. Investors with cash on the sidelines to deploy at current discounted prices should consider these high-paying stocks.

High-Yield Dividend Stocks to Watch in the Coronavirus Sell-Off

In a world where investors struggle to earn decent returns from fixed-income instruments, dividend stocks have emerged as a strategy for earning higher returns. The average dividend yield for the S&P 500 is just over 1.9%, dramatically higher than the 0.09% in interest people earn in a savings account on average.

Moreover, the stock market offers investments that not only produce dividend yields that significantly exceed that average, but they also provide the income or cash flow that will allow them to maintain or increase dividends over time. Here are five stocks in five different industries that fit that description. Investors with cash on the sidelines to deploy at current discounted prices should consider these high-paying stocks.

1. AbbVie


AbbVie (NYSE:ABBV) stock sold off in recent years due to the impending patent expiration of its primary revenue driver, Humira. As it began to recover amid new drug developments, the announcement of its purchase of Allergan initially weighed further on the stock.

However, AbbVie looks positioned to move on from Humira. Two hematologic oncology drugs, Imbruvica and Venclexta, together registered 37% in reported revenue growth year over year. Humira saw no net increase over the same period.

Moreover, AbbVie has shown signs of recovery in recent months. Despite this increase, AbbVie stock trades at a forward P/E ratio of around 8.7. This occurred despite the fact that analysts forecast earnings increases of 8.3% this year and 8.7% in fiscal 2021.

Furthermore, due to its history as a subsidiary of Abbott Laboratories, it has now benefited from 47 consecutive years of payout hikes. This year's annual payout of $4.72 per share yields around 5.3%.

The company should be able to easily maintain this dividend. The dividend payout ratio stands at about 48.8%, and cash flow has consistently come in well above the cost of paying the dividend. Moreover, Dividend Aristocrats such as AbbVie tend to continue dividend hikes unless the company's financial condition makes payout raises untenable. As sales of its hematologic oncology drugs continue to grow, investors could find it hard to pass up on this growth and income play.

2. AT&T


AT&T (NYSE:T) struggled for much of the decade as wireless competition and cord-cutting ate into the telecom giant's profits. On top of that, the cost of building out a 5G network weighed on the company. Then, acquisitions of DirecTV and the division now known as WarnerMedia placed further pressure on AT&T's balance sheet.

The company's dividend is another significant cost. In 2019, dividend payments set the company back $14.89 billion. The yearly payout has since risen from $2.04 to $2.08 per share.

However, AT&T is also a Dividend Aristocrat, and the company probably wants to avoid the pain of ending the 35-year streak of payout hikes. Hence, even at a yield of around 5.8%, the dividend will likely keep rising. Furthermore, at a payout ratio of about 57.6%, AT&T can probably continue to fund the dividend.

To be sure, the profit growth rate of 1.1% forecasted for the year will likely not inspire investors. However, profit growth should improve, and once 5G takes off, AT&T will be one of only three companies providing this next-generation service in the U.S. Furthermore, with a forward P/E ratio of around 9.9, investors can pick this stock up at a relative bargain.

3. Altria


Altria (NYSE:MO) continues to defy odds. The Surgeon General's report that warned of the dangers of smoking came out more than 56 years ago. At that time, around 42% of Americans smoked cigarettes.

That number fell to 15.5% by 2016. Nonetheless, both Altria stock and its dividend continued to rise amid the smoking decline. In January 1964, Altria traded at a split-adjusted level of about $0.13 per share. The stock has since seen seven stock splits and numerous dividend increases. The current $3.36 per share annual dividend yields around 8.3% and has risen for 11 consecutive years.

Further, even with the massive increases, Altria sells for only about 9.2 times forward earnings. While the payout ratio of around 75.8% may appear elevated, earnings growth of 5% for the current year should be enough to keep the high payout and the subsequent increases coming.

Altria continues to face challenges. Declines in smoking could still hurt the company's growth. Also, the SEC probe of the JUUL Labs investment could weigh on Altria stock for now. However, Altria also invested $1.8 billion in Canadian marijuana giant Cronos Group. As more jurisdictions legalize cannabis for both medical and recreational purposes, this investment could eventually drive earnings growth for Altria stock.

4. ExxonMobil


ExxonMobil's (NYSE:XOM) yearly dividend of $3.48 per share, or a yield of 6.75%, seems impressive. However, a slowdown in China related to the coronavirus has reduced overall energy consumption. This caused ExxonMobil stock to drop by nearly 27% in the first two months of 2020.

Still, some seem to forget that ExxonMobil is a diversified energy play. Yes, its upstream segment deals with volatility as fluctuating oil prices often make or break the profitability of drilling projects. However, the company also refines and sells petroleum products and chemicals, a relatively steady business regardless of oil prices.

Moreover, for all of the focus on renewables, electric vehicles only made up 1.8% of all vehicle sales in March 2019. Hence, investors can safely assume that fossil fuels are not going anywhere.

Nonetheless, ExxonMobil now trades at a forward P/E ratio of around 14. With five-year profit growth projections averaging 5.65% per year, the dividend is arguably the primary motivation to buy Exxon stock now.

More importantly, ExxonMobil has maintained a 37-year streak of consecutive annual payout hikes. This means the dividend rose in both high and low-oil-price environments. It also means that dividends increased when the payout ratio reached 108.9%, as it has now. Free cash flow fell well below the dividend expense in 2019. Still, even if prices remain depressed, both divestitures and new ventures could fund annual payout hikes for the foreseeable future.

5. PennyMac Mortgage Investment Trust


PennyMac Mortgage Investment Trust (NYSE:PMT) specializes in mortgage-related assets, particularly on the residential side. As a real estate investment trust, it must pay out at least 90% of its net income in the form of dividends to avoid most income taxes.

PennyMac is not a household name among stocks. However, the payout could compensate for a lack of name recognition. Current shareholders receive an annual payout of $1.88 per share, a yield of around 8.75%.

Moreover, given the previously mentioned 90% payout requirement, the dividend payout ratio of about 84.5% appears slightly low. Also, in 2019, it generated almost $201.42 million in net income attributable to common shareholders, more than enough to cover the required dividend payments.

20 Best Yielding Healthcare Stocks With A Lower Volatility Than The Market

Healthcare dividend stocks that are less volatile than the market originally published at "long-term-investments.blogspot.com". This month I like to show you the best yielding large cap stocks from all sectors that are less volatile than the market. I will start today with the healthcare sector.

It’s very important when you invest money that you have a view on your risk exposure. It doesn’t make sense in my view to enter big risks without a higher return. Every loss you can avoid is also a return you don’t need to work out.

Linked is a sheet of the 20 best yielding healthcare dividend stocks with a market capitalization of more than USD 10 billion as well as a beta ratio under one. Two of the results are High-Yields and fourteen are recommended to buy. The majored drug manufactures is still the dominating group in the screen, followed by a gaining medical instruments and supplies industry.

Here are my favorite stocks:

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Baxter International (NYSE:BAX) has a market capitalization of $39.47 billion. The company employs 51,000 people, generates revenue of $14.190 billion and has a net income of $2.326 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3.741 billion. The EBITDA margin is 26.36 percent (the operating margin is 20.36 percent and the net profit margin 16.39 percent).

Financial Analysis: The total debt represents 29.08 percent of the company’s assets and the total debt in relation to the equity amounts to 85.47 percent. Due to the financial situation, a return on equity of 34.40 percent was realized. Twelve trailing months earnings per share reached a value of $4.18. Last fiscal year, the company paid $1.57 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 17.29, the P/S ratio is 2.77 and the P/B ratio is finally 5.69. The dividend yield amounts to 2.49 percent and the beta ratio has a value of 0.51.
Earnings and Dividends of Baxter

Stryker Corporation (NYSE:SYK) has a market capitalization of $24.84 billion. The company employs 21,241 people, generates revenue of $8.657 billion and has a net income of $1.298 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $2.227 billion. The EBITDA margin is 25.72 percent (the operating margin is 20.11 percent and the net profit margin 14.99 percent).

Financial Analysis: The total debt represents 12.97 percent of the company’s assets and the total debt in relation to the equity amounts to 20.31 percent. Due to the financial situation, a return on equity of 15.95 percent was realized. Twelve trailing months earnings per share reached a value of $3.39. Last fiscal year, the company paid $0.85 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 19.28, the P/S ratio is 2.85 and the P/B ratio is finally 2.89. The dividend yield amounts to 1.62 percent and the beta ratio has a value of 0.92.
Earnings and Dividends of Stryker

Covidien (NYSE:COV) has a market capitalization of $31.95 billion. The company employs 43,400 people, generates revenue of $11.852 billion and has a net income of $1.902 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3.044 billion. The EBITDA margin is 25.68 percent (the operating margin is 20.34 percent and the net profit margin 16.05 percent). 

Financial Analysis: The total debt represents 22.64 percent of the company’s assets and the total debt in relation to the equity amounts to 47.70 percent. Due to the financial situation, a return on equity of 18.66 percent was realized. Twelve trailing months earnings per share reached a value of $3.93. Last fiscal year, the company paid $0.94 in the form of dividends to shareholders. 

Market Valuation: Here are the price ratios of the company: The P/E ratio is 17.20, the P/S ratio is 2.70 and the P/B ratio is finally 3.03. The dividend yield amounts to 1.54 percent and the beta ratio has a value of 0.88. 
Earnings and Dividends of Covidien

Take a closer look at the full list of the best yielding healthcare stocks that are less volatile than the market. The average P/E ratio amounts to 17.72 and forward P/E ratio is 12.83. The dividend yield has a value of 3.05 percent. Price to book ratio is 3.52 and price to sales ratio 2.70. The operating margin amounts to 20.23 percent and the beta ratio is 0.66. Stocks from the list have an average debt to equity ratio of 0.68.

Here is the full table with some fundamentals (TTM):



20 Best Yielding Healthcare Stocks With Low Beta Ratios (Click to enlarge)

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