stethoscope
getty
Healthcare – along with consumer staples (“buy”) and utilities (“leave the lights on”) – keep the portfolio stable. Plus, they usually pay dividends too!
Of the three security sectors, healthcare is also a steady growth market. Consider these stats from the Centers for Medicare & Medicaid Services:
- National health spending is set to grow at an average annual rate of 5.4% for 2019-28 and to $ 6.2 trillion by 2028.
- National health expenditure is expected to grow 1.1 percentage points faster than gross domestic product annually over the same period.
- Between 2019 and 2028, the share of healthcare in the economy will increase from 17.7% to 19.7%.
- Medical goods and services price growth (as measured by the personal health care deflator) is expected to accelerate, averaging 2.4% per year for 2019-28.
That’s not new. We all feel this growing pinch year after year. But whether we like it or hate it, that pain in our pockets has resulted in huge gains for the healthcare sector, which has not only performed exceptionally well over the long term, but has also kept volatility low for shareholders.
Healthcare stocks: respectable performance, cool serenity
Return ranks based on best performance; 1 = best. Beta ranks based on lowest beta; 1 = lowest beta.
Morning star
Better still, healthcare is responsible for some of the most reliable dividends in the world, with multiple sector names boasting of the dividend aristocracy, but it’s also not hard to find fat returns that pay off over 5%.
Here we examine five healthcare names that should keep your income portfolio in tip-top shape for years to come:
AbbVie (ABBV ABBV)
Dividend yield: 4.5%
AbbVie (ABBV) was known to be outsourced Abbott Laboratories ABT (ABT) Early 2013. The original dividend aristocrat kept its lines of medical device and other health care products while the latter would hold onto biopharmaceutical products like Humira, AndroGel and Tricor.
And in line with the pharmaceutical industry, ABBV has offered the superior dividend since parting with ABT.
You can’t talk about AbbVie without discussing Humira – its blockbuster drug that treats Crohn’s disease, rheumatoid arthritis, psoriasis, and other diseases and makes more than a third of total revenue.
Nowadays, however, it is worth talking about the fact that the proportion of revenue generated by it is getting smaller and smaller. In the final quarter of 2019, Humira’s sales accounted for nearly 60% of total cake. But patent expiry, as they do, diminishes its opportunities not only in the US but also overseas.
Fortunately, AbbVie makes up for this with immunological treatments Skyrizi and Rinvoq, as well as oncological treatments like Imbruvica and Venclexta. It also tries to grow through acquisitions; Last year, the company completed a $ 63 billion buyout from botox manufacturer Allergan AGN.
Unlike many companies, AbbVie didn’t really miss a beat in 2020. Revenue rose 37.7% to $ 45.8 billion, while adjusted earnings rose 18.1% to $ 10.56 per share. The pros expect another strong year in 2021 with a 22% increase in sales and a profit of 19% better than 2020.
In normal years, the dividend is now covered with roughly twice the cash flow required to cover it. That makes ABBV one of the few traditional blue chips with a return of over 4% that doesn’t require you to sleep.
National Health Investors (NHI)
Dividend yield: 5.4%
While many health stocks offer dividends better than the market average, you need to venture into the real estate space to make any real sizable income.
National Health Investors (NHI) is a real estate investment trust (REIT) that manages 242 properties in 34 states – mostly senior citizens’ homes and skilled care facilities, with a range of medical office buildings and other healthcare properties.
Elderly care once seemed like an indispensable business. The aging of baby boomers would certainly overwhelm these facilities, resulting in literally decades of higher cash flows. NHI seemed to reflect this path as dividends have increased every year since 2001.
But things have changed.
Several NHI tenants are feeling the stress of the COVID downturn, which has shaken the general thesis around senior care facilities. Recently, National Health Investors entered into a rental deferral agreement with the independent residential facility operator Holiday Retirement, forcing the professionals to downgrade their estimates for FFO (Funds from Operations, which is an important measure of a REIT’s profitability).
In the short term, the postponement of vacation and the uncertainty among other tenants forced NHI to cut its quarterly payout by 18.4% to 90 cents per share. While the return is still above 5% regardless, investors should avoid this particular REIT until the smoke clears.
Sabra Health REIT (SBRA)
Dividend yield: 6.7%
Sabra Health REIT (SBRA) is a similar game that suffered its dividend loss last year.
Sabra has 426 properties nationwide, two-thirds of which are qualified nursing and transitional care facilities. Another 25% are either leased or managed senior housing facilities, the remainder is divided between specialty hospitals and other health care buildings.
Like many other companies cutting their payouts in 2020, Sabra announced its dividend cut in the spring, long before the real damage from COVID was known. SBRA announced in March 2020 that it would withdraw its payout by 33% to 30 cents per share – a move that is expected to save the company $ 30 million in cash quarterly.
“It is impossible to predict the ultimate impact on our operators. We believe the quarterly dividend cut is an appropriate response to improve the company’s management of this pandemic, ”said CEO Rick Matros at the time.
Sabra is far from pretty right now, and stocks still haven’t rallied to pre-pandemic levels. However, the early dividend cut actually helped bolster the balance sheet and put the REIT on solid ground while its tenants’ businesses rebound. In fact, it could be argued that that nearly 7% return is cheap, with SBRA trading at a hair below 11 times the 2021 estimates for the FFO.
Global Medical REIT (GMRE)
Dividend yield: 5.3%
Lest you think that every REIT in the healthcare sector is cutting dividends, let’s take a look at Global Medical REIT (GMRE)which improved its payout earlier this year.
The nickname “Global Medical” is a bit of an annoyance as this healthcare REIT is entirely US-focused. GMRE rents 145 buildings to 117 tenants in 29 states with an occupancy rate of just over 99%. More than 60% of the company’s real estate are medical practices, another 20% are inpatient rehabilitation facilities, 7% are surgical hospitals and the rest is spread across other building types in the healthcare sector.
GMRE has been a serial acquirer since its IPO in 2016, with the portfolio growing 74% annually to currently $ 1.1 billion in gross investment. But it also grows organically by building in annual rent increases averaging around 2%.
Global Medical REIT experienced a smaller COVID slump than many in its industry due to its special mix of buildings and recovered faster. For the first time since going public, the company’s financial situation was finally able to improve the dividend, but only by 2.5% to 20.5 cents per share.
What I like more is the fact that GMRE managed to simultaneously reduce its leverage and settle the debt with most of the proceeds from a public share offering in the first quarter. Existing shareholders may not have liked the dilution, but it obviously doesn’t put buyers off.
LTC properties (LTC)
Dividend yield: 5.8%
We can also make hefty monthly dividends from healthcare if we know where to look.
LTC properties (LTC) is a senior housing and healthcare REIT that invests in such properties through mortgage financing, sale-leaseback, and other methods. It currently has 177 investments from 30 partners in 27 states.
LTC’s tenant mix consists of around 50-50 senior citizen apartments and qualified nurses, which throws the COVID storm in the balance. Last March, the company was forced to undo a share buyback plan it announced just a few weeks earlier (although it managed to maintain its monthly dividend), and the bear market took LTC stock up to 40% The deeps.
As with NHI, LTC continues to feel the effects of COVID. The company’s most recent quarterly results missed the mark (64 cents per FFO share versus 68 cents expectations) due to a non-payment by tenant Senior Lifestyle Corporation (SLC) and lower rental increases for troubled operators. In fact, SLC hasn’t paid rent in seven months, and NHI recently turned over a dozen SLC properties to other senior housing operators.
Brett Owens is Contrarian Outlook’s chief investment strategist. For more great income ideas, get your free copy of his latest special report: Your Early Retirement Portfolio: 7% Dividends Every Month Forever.
Disclosure: none
source https://dailyhealthynews.ca/5-safe-healthcare-dividends-yielding-5-5/
No comments:
Post a Comment