3 Dividend-Paying Healthcare Stocks to Outperform in the Bear Market

NYSE: UNH | UnitedHealth Group Inc. News, Ratings, and Charts

UNH – The bear market is creating a challenging environment for investors. One place to find outperformance could be high0-quality, healthcare stocks that are paying a dividend. Therefore, investors should consider dividend-paying healthcare stocks like Johnson & Johnson (JNJ), AbbVie Inc. (ABBV), and Unitedhealth Group (UNH).   .

The healthcare sector is demonstrating relative strength during this bear market. This is not surprising as health care companies are pretty insulated from changes in economic growth or monetary policy.

So far in 2022, the Health Care Select Sector SPDR Fund (XLV) is down 13% which is nearly half of the S&P 500’s decline. Another potential catalyst is weakness in longer-term rates as recession odds keep climbing. Many healthcare companies with strong balance sheets outperform in this environment due to an increase in share buybacks. This is a tax-efficient strategy to increase earnings per share (EPS) and return capital to shareholders.

Therefore, investors should consider adding dividend-paying stocks in the healthcare sector to their portfolios. 3 of the top dividend-paying healthcare stocks are Johnson & Johnson (JNJ), AbbVie Inc. (ABBV), and Unitedhealth Group (UNH).   

Johnson & Johnson (JNJ)

JNJ is engaged in the research, development, production, and sale of a variety of healthcare products and services. Its three major segments are Consumer, Pharmaceutical, and Medical Devices.

In terms of dividends, JNJ has one of the best track records of consistently raising its payout. Currently, it pays a 2.7% yield and has raised its dividend by an average of 6% annually. The company continues to post strong results, implying that there should be no disturbance in its dividend history.  Next year, analysts expect JNJ’s revenue and EPS to increase 3.8% and 6% year-over-year to $100.14 billion and $10.89, respectively.

JNJ’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting. A-rated stocks have posted an average annual performance of 30.7% which is significantly better than the S&P 500’s average performance of 7.1%. 

AbbVie Inc. (ABBV)

ABBV develops and sells pharmaceutical products worldwide. Its products are focused on treating conditions such as chronic autoimmune diseases in rheumatology, gastroenterology, dermatology, oncology, virology, metabolic diseases, pain, and other serious health conditions. 

Like JNJ, ABBV has a history of consistently raising its dividend. Over the past five years, it’s increased at an 18% annual rate. Currently, its dividend yield is 4.4% which is considerably higher than the market average and the 1.27% yield on the 10-year. Thus, I expect the stock to continue generating inflows especially as the market is currently in a risk-averse mood. 

The company is also attractive from a valuation basis as it has a forward P/E of 8.4 which is also significantly cheaper than the S&P 500’s forward P/E of 22.1. Lower valuations can provide a cushion especially when the market moves lower. 

ABBV’s POWR Ratings are consistent with this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings also evaluates stocks by various components. Given that analysts have been steadily hiking earnings estimates over the past few months for 2021 and 2022 EPS, it’s not surprising that ABBV has a B for Growth. Click here to see ABBV’s ratings for other components including Value, Industry, Quality, Stability, Sentiment, and Momentum. 

Unitedhealth Group (UNH)   

UNH has two major segments: UnitedHealthcare and Optum. UnitedHealthcare provides health care coverage and benefits services. Optum provides information and technology-enabled health services to provide employers with products and resources to plan and administer employee benefit programs.

UNH has been an outperformer over the past year and past decade for a couple of reasons. As the largest health insurance company in the US, it benefits from a strong labor market as this leads to more customers. Additionally, healthcare costs have continually trended higher at a pace faster than inflation. This has also boosted the company’s revenue, cash flow, and margins. 

Given these positives, It’s not surprising that UNH has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. A-rated stocks have outperformed the market by a significant margin. UNH has an A for Stability which makes sense as it’s the largest health insurance company in the US and the improving labor market means that its customer base will only grow.

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UNH shares were unchanged in premarket trading Wednesday. Year-to-date, UNH has declined -3.72%, versus a -20.79% rise in the benchmark S&P 500 index during the same period.


About the Author: Jaimini Desai


Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles. More...


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