March9,2020 BARRON’S 33
INCOME INVESTING
Health-Care Stocks:
Volatile but Well Yielding
H
ealth-care stocks have been
volatile, partly owing to con-
cerns about heightened regu-
lation that may come about
depending on the outcome of the presi-
dential election inNovember. Many of
these stocks, however, offer solid divi-
dends with attractive yields at a time
when coronavirus fears are intensifying.
“Health care is one of those areas
where you do have innovation, but many
of those innovative companies do pay a
dividend,” says Charles Toole, a portfolio
manager at Adviser Investments who
helps run a strategy focused on dividend
stocks. “This happens to be a sector where
we are finding good dividends and good
dividend growth prospects.”
Thanks to falling stock prices in the
wake of the coronavirus scare, the yields of
many health-care stocks are even higher
than they were 10 days ago, and the valua-
tions look reasonable overall. TheHealth
Care Select Sector SPDRfund (ticker:
XLV) recently fetched 15.7 times this year’s
profit estimate, below its five-year average
of 16.7 times, according to FactSet.
Toole’s holdings include pharmaceuti-
cal companyAbbVie(ABBV), which
yields 5.4%; biotech firmAmgen
(AMGN), 3%; managed-care provider
Anthem(ANTM), 1.4%; health-care
conglomerateJohnson & Johnson(JNJ),
2.7%; and medical-device maker
Medtronic(MDT), 2.1%.
Year to date, health-care stocks have
held up relatively well compared with the
S&P 500 index, which is down about 4%.
Health-care stocks in the S&P 500 have
lost about 5%, making it one of the best-
performing sectors. Energy has fallen
more than 20%, and financials are off
about 10%.
A big overhang for health-care stocks,
and managed-care companies, in particu-
lar, is the specter of a Medicare for All
system that has been advocated by Demo-
cratic presidential candidate Sen. Bernie
Sanders. But for Sanders to secure the
Democratic nomination, defeat President
Donald Trump inNovember, andthen
manage to get Congress to pass a Medicare
for All system will be hard to pull off.
“Despite heightened election-year rhet-
oric, we continue to believe that fundamen-
tal structural reform of the U.S. health-care
system is unlikely,” the portfolio managers
of theHartford Healthcarefund
(HGHAX) wrote in their 2020 assessment.
As of Dec. 31, the fund’s top holdings
includedPfizer(PFE), which yields
4.3%;Abbott Laboratories(ABT),
1.8%; andBristol-Myers Squibb(BMY),
3%. Bristol-Myers this past week de-
clared a quarterly dividend of 45 cents a
share, up from 41 cents, for a 10% boost.
The stock yields 3%.
In this uncertain and volatile market, a
healthy dose of income could be just what
the doctor ordered.B
By Lawrence C. Strauss
Healthy Dividends
Health-care stocks have been volatile over the past year, but their attractive dividends can help
ease any pain.
Company / Ticker Recent Price Dividend Yield 1-Yr. Return Specialty
AbbVie / ABBV $88.69 5.3% 16.9% Pharmaceuticals
Amgen / AMGN 212.20 3.0 13.3 Biotech
Anthem / ANTM 271.27 1.4 -11.6 Managed Care
Johnson & Johnson / JNJ 140.02 2.7 1.5 Health-Care Congolomerate
Medtronic / MDT 102.62 2.1 12.6 Medical Devices
Note: Data through March 2. Source: FactSet
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