Barron\'s - 09.03.2020

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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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