Best Health Care Stocks in 2019
What is the Healthcare Sector?
The Healthcare Industry consists of companies that provide medical services, manufacture medical equipment or drugs, provide medical insurance, or otherwise facilitate the provision of healthcare to patients. Health Care Stocks should continue to remain top performers in 2019.
Health Care Sector Overview
The balance sheets of health care companies are solid. Their stocks have offered attractive dividend yields and the sector’s overall cost structure appears to have improved. Demand appears to be on the rise for health care products and services. On the other hand, political and legal rhetoric around the Affordable Care Act can be expected to fuel continued volatility.
Watch for the Federal Reserve to continue to raise rates. According to BCA Research, the health care sector has outperformed during Fed hiking cycles on average since 1970. Past performance does not guarantee future results and there are risks. Nevertheless, it is worth taking note and considering as many contributing factors as possible.
Investing in Health Care Stocks
The health care sector has a lot of positives and has had good performance over the past year. Analysts expect the solid performance to come into 2019. Balance sheets are solid, stocks in the group generally have good dividend yields, and the overall cost structure appears to be much improved. Also, demand appears to be on the rise for health care products and services, partly as a result of an aging population.
- Increased need for services: An aging population requires more extensive drug treatments and medical care. The health issues associated with obesity also could boost demand for medical services.
- Strong financials: Balance sheets in the health care sector remain flush with cash, increasing the possibility of higher dividend payments, share-enhancing stock buybacks, and mergers and acquisitions.
- Regulatory uncertainty: Health care was a central issue in many recent political campaigns. It seems likely that new proposals regarding the health care sector will be made. However, with a split legislature in Washington, getting much done seems unlikely at this point.
- Fiscal policy concerns: . Health care funding mechanisms could be changed as Congress deals with growing deficits. The fiscal situation in Washington creates uncertainty regarding the health care sector.
Best Health Care Stocks Today – Drugs
Top Rated Health Care Stocks – AbbVie (ABBV)
AbbVie owns the single best-selling drug in the entire world: Humira, AbbVie’s blockbuster treatment for arthritis, Crohn’s disease, ulcerative colitis, plaque psoriasis and other indications. Last quarter, ABBV reported $3.5 billion in Humira sales alone, as the competition for a drug like Humira is sparse and the company knows it. Two pen-based doses of the injected drug, which usually must be taken every two weeks, cost roughly $5,000 without insurance. Trading at 10 times forward earnings, ABBV also boasts a 4.8 percent dividend and a remarkable 45-year streak of increasing its dividend payment annually
Best Health Care Stocks Buy – Johnson & Johnson (JNJ)
Named as one of U.S. News’ 10 best stocks to buy for 2019, Johnson & Johnson is one of the most firmly entrenched businesses on the planet. A combination of trusted brand names, scale, distribution advantages and patent protection gives JNJ the sort of lasting power and cash flows few companies ever enjoy. Johnson & Johnson’s pharmaceutical division, accounting for 45 percent of overall sales, is also JNJ’s fastest-growing segment. JNJ has dozens of late-stage drugs in its pipeline, research and development efforts, potential licensing agreements and acquisition opportunities. Expect JNJ to keep investing in pharma while its other multibillion-dollar divisions – medical devices and consumer, hold steady.
Health Care Stocks Buy – Icon PLC (ICLR)
Analysts expect this $8 billion medical research company to grow revenue and earnings per share by 8 and 12 percent, respectively, in 2019. ICLR has an attractive growth rate. The company is a contract research organization. Icon helps drugmakers coordinate and conduct the clinical trials required for regulatory approval in the U.S., Europe and other markets. This is an essential service that other drug and biotech behemoths outsource. This essential niche makes ICLR an attractive play for continued growth in pharma, biotech and medical devices.
Top Health Care Stocks – Managed Healthcare
Best Health Care Stocks Invest – Anthem (ANTM)
Despite an impressive rally in 2018, ANTM still looks like one of the best health care stocks to buy for 2019. The $75 billion health care plan provider trades at a very reasonable 22 times earnings and 16 times forward earnings. The company also pays a very modest 1 percent dividend to boot. With the 2018 midterm elections all but guaranteeing the Affordable Care Act is safe for at least another two years, health insurers like Anthem have been significantly de-risked as investments. Pharmacy Benefit Management (PBMs) reduce prescription drug costs and improve convenience and safety for consumers, employers, unions, and government programs. Anthem has been working hard to build out its own PBM, which it plans to debut in 2020. That business can only improve ANTM growth prospects
Top Health Care Stocks – Centene Corp. (CNC)
Centene is a St. Louis, Missouri-based health insurer with a niche focus on the uninsured and underinsured. Government-subsidized programs like Medicaid, coupled with Obamacare’s expansion of the addressable market, make CNC an attractive stock for 2019. Revenue and earnings per share are expected to rise 16 and 19 percent, respectively, in 2019. CNC is also a pharmacy benefit manager (PBM), providing the increasingly valuable service of negotiating lower drug prices for its members due to volume buying – and then taking a cut for itself.
Top Health Care Stock – UnitedHealth Group Incorporated (UNH)
UnitedHealth is one of the more impressive players in the healthcare field. It offers healthcare plans to consumers and employers, and it also has plans for military personnel. Furthermore, the company offers Medicaid plans, children’s plans and plans for the elderly. UnitedHealth has an extensive network of physicians and hospitals that use its plans. It also markets software and information technology.
Best Health Care Stocks – Medical Equipment
Top Rated Health Care Stocks – Align Technology (ALGN)
Align Technology is an $18 billion company with a promising future in the medical device market. The company makes Invisalign – a popular invisible orthodontic product to straighten teeth. Invisalign is increasingly gaining market share from braces as a less-invasive way to correct crooked teeth. After slowing growth in the third quarter, ALGN shares seem to have found their footing. Current market share is only about 13 percent, so ALGN should still have years of potential growth ahead. Zero debt, plus a recent deal to take a large stake in up-and-coming competitor Smile Direct Club, underscore ALGN as a good bet for 2019.
Best Health Care Stock – Becton, Dickinson and Co. (BDX)
Becton, Dickinson has spent well over 100 years earning its status as one of the top health care stocks. Founded in 1897, BDX is a leader in medical supplies and diagnostics. The company sells everything from anesthesia needles and antiseptic products to cervical cancer screening systems and kits for cell analysis. BDX has been increasing its dividend payout annually since Richard Nixon was president. They have been able to raise their dividend for over 25 consecutive years. Becton, Dickinson sees revenue growing between 5 and 6 percent, and profits advancing 10 percent, in fiscal 2019.
Health Care Stocks Buy – Stryker Corporation (SYK)
Stryker markets medical equipment. This focus keeps it out of the debate about how much the government should dictate drug prices. The company has provided 10 uninterrupted years of revenue growth. Stryker markets to three healthcare areas: orthopedics, surgical equipment, and brain and spine surgery based on advanced technology.
Best Health Care Stock – Medical Facilities
Top Rated Health Care Stock – CVS Health Corp. (NYSE: CVS)
CVS recently completed its acquisition of Aetna, transforming the pharmacy chain into a company consumers truly haven’t seen before. CVS plans to start emphasizing its MinuteClinics for Aetna-insured patients. This will cut costs and boost margins for its Aetna division as well as give potential cost advantages compared to rival insurers. Existing Aetna customers will have an incentive to frequent CVS stores for simple health care needs. This will increase foot traffic, prescription revenue, retail sales and customer loyalty for CVS. These advantages make CVS, which pays a 2.5 percent dividend and trades for 11 times forward earnings an interesting play in 2019.
Health Care Stocks With Dividends
Healthcare Dividend Stocks – Abbott Laboratories (ABT)
ABT recently paid out its 377th consecutive quarterly dividend and has raised its quarterly dividend (now 28 cents per share) for 46 consecutive years. This predates the stock market crash of 1929 by five years. Its 12-month dividend yield is 1.81 percent – ahead of the sector’s 1.5 percent. The company has a three-year dividend growth of 6.1 percent. Meanwhile, the stock of this Chicago-based company continues to roll. It is up 32 percent over the last 12 months and 90 percent over the last five years.
Omega Healthcare Investors (OHI)
Omega Healthcare Investors is a Real Estate Investment Trust (REIT) focused on the healthcare sector. The company owns 1,012 properties in 42 states and the United Kingdom. These properties include 121 assisted-living facilities to healthcare operators in addition to 813 skilled-nursing facilities, 16 specialty facilities, and one medical office building. Omega also has fixed-rate mortgages on 47 skilled nursing facilities and four assisted-living facilities, and 10 facilities that are closed or held for sale.
Most of Omega’s revenue is made from rental income. However, the company also makes nearly 8% of its total revenue from mortgage interest income. This mortgage revenue stems from fixed rate mortgage loans. These loans are secured by liens on the underlying real estate and personal property of the mortgagor.
Investors have a lot to like about Omega’s dividend. The yield currently stands at 8.3%. Even better, Omega Healthcare Investors has increased its dividend payment for 21 consecutive quarters.
Healthcare Dividend Stocks – Community Healthcare Trust (CHCT)
Community Healthcare is another real estate investment trust. It is concentrated in non-urban areas, mostly the Midwest, South and Texas. The company builds its fortunes on buildings: clinics, medical offices, mental health facilities and specialty properties. Trading at about $31 per share, CHCT remains close to its 52-week high and has a robust dividend of 40 cents per share. It typifies many health care REITS in its strong performance.
High Yield Dividend Stocks
High yield dividend stocks appeal to many investors, particularly those living in retirement. You are paid a portion of the company’s earnings for every share of a dividend stock that you own. In addition to capital appreciation if the stock price rises, you also get paid simply for owning the stock.