7 Medical Stocks To Buy With Market-Beating Yields

Medical is one of the very few sectors that generally show great resilience during volatile phases in the market. It is also one of the few sectors that have reported earnings growth in the recently concluded first quarter of 2016. Both these features appeal to dividend loving investors.

This is because the dividend paying capacity of a stock is highly dependent on its earnings growth trend and the overall health of the sector to which it belongs. A regular flow of dividends ensures that a steady income flow is generated even if the market remains volatile. Moreover, regular dividend payments demonstrate a company’s sound fundamentals as well as its underlying business strength.

Medical’s Growth Prospects Support Yield

We note that expansion into emerging markets, positive demographic trends, product innovation and continuing consolidation are some of the key growth factors for the Medical sector. These aspects will continue to help companies generate steady earnings growth in the near term.

Additionally, the weakening of the U.S. dollar against foreign currencies – which has been a drag on results for quite some time – will drive top and bottom-line growth. Moreover, the recent suspension of the controversial 2.3% medical device excise tax for two years will boost profits for the entire medical device industry, which forms a major part of the Medical sector.

These encouraging factors will certainly help the companies in the Medical space sustain their market-beating dividend yields. And investors with a penchant for high dividend yield stocks will naturally flock this sector, regardless of the sharp vicissitudes in the market.

Our Picks

We have narrowed down our search to the following medical stocks based on a good Zacks Rank and dividend yield of more than 2%.

New York-based Bristol-Myers Squibb Company (NYSE:BMY) is a global specialty biopharmaceutical company. This Zacks Rank #1 (Strong Buy) stock flaunts a dividend yield of 2.06% and has a long-term earnings growth rate of 21.5%.

Investors can also count on Pfizer Inc. (NYSE:PFE) , another Zacks Rank #1 stock. This New York-based company has a solid dividend yield of 3.44% and a long-term earnings growth rate of 5.4%.

Another large-cap Pharmaceutical stock - Johnson & Johnson (NYSE:JNJ) - is an attractive choice for dividend lovers. This Zacks Rank #2 (Buy) sports a strong dividend yield of 2.77% and a long-term earnings growth rate of 5.7%

We also prefer Abbott Laboratories (NYSE:ABT) , another Zacks Rank #2 stock. Abbott Park, IL-based Abbott has a dividend yield of 2.67% and a long-term earnings growth rate of 10%.

Beyond large-cap Pharmaceutical stocks, our search picks Digirad Corporation (NASDAQ:DRAD) . The Poway, CA-based diagnostic nuclear and ultrasound imaging systems and services provider carries a Zacks Rank #2 and its current dividend yield of 3.88% is quite impressive.

Nursing Home operator and long-term healthcare services provider Kindred Healthcare Inc. (NYSE:KND) is another good choice for investors. This Zacks Rank #2 stock has a dividend yield of 3.79% and a long-term earnings growth rate of 8%.

Last but not least, HEALTHSOUTH Corp. (NYSE:HLS) is a provider of outpatient surgery and rehabilitative healthcare services. Birmingham, AL-based HEALTHSOUTH has a Zacks Rank #2, with a dividend yield of 2.24% and a long-term earnings growth rate of 12.5%.

Conclusion

Although the sustainability of dividend yield is difficult to predict, we believe that the Medical sector’s compelling prospects will shield it against the vagaries plaguing the market. The gradually improving U.S. macro-environment and the uptick in the overall stock market on the back of a reversal in oil prices bode well for the sector.


DIGIRAD CORP (DRAD): Free Stock Analysis Report

BRISTOL-MYERS (BMY): Free Stock Analysis Report

PFIZER INC (PFE): Free Stock Analysis Report

JOHNSON & JOHNS (JNJ): Free Stock Analysis Report

ABBOTT LABS (ABT): Free Stock Analysis Report

KINDRED HLTHCR (KND): Free Stock Analysis Report

HEALTHSOUTH CP (HLS): Free Stock Analysis Report

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Zacks Investment Research