Healthcare has traditionally been one of the most stable and recession-resistant sectors. Irrespective of the in-hand income status, everyone needs healthcare at some point.
Going by a WHO report, about $8.3 trillion is spent on healthcare globally and almost $3.8 trillion in the United States alone. With the healthcare sector growing considerably faster than the overall global economy, these numbers will likely swell by the end of the decade.
Specifically, the COVID-19 pandemic pushed MedTech, a major healthcare wing, into the limelight. Over the past couple of years, medical devices and supplies have been in demand consistently, with ventilators, diagnostic equipment, and PPE being needed by healthcare systems struggling to fight the global crisis. For 2022, data shows that MedTech has not only weathered major challenges but has entered a period of renewal.
However, considering the ongoing emergence of new COVID-19 variants across the globe, investors keen on MedTech stocks should ideally focus on low-beta and high-yield dividend MedTech companies with sustainable business models and a long track of profitability. Considering this, stocks like
Becton, Dickinson and Company ( BDX Quick Quote BDX - Free Report) , Phibro Animal Health Corporation ( PAHC Quick Quote PAHC - Free Report) , McKesson Corporation ( MCK Quick Quote MCK - Free Report) and UnitedHealth Group Inc ( UNH Quick Quote UNH - Free Report) seem like the right picks. Dividend Yield Stocks With Low Beta: A Winning Strategy
Amid the market turmoil, it is prudent to adopt a longer-term investing strategy and pick some dividend-paying, low-beta MedTech stocks which are fundamentally strong.
Dividend acts as a major source of consistent income for investors in any market though it does not offer impressive price appreciation. While several dividend stocks could provide capital appreciation, focusing on those with a history of dividend growth should lead to a healthy portfolio with greater scope for capital appreciation instead of simple dividend-paying stocks or those with high yields.
One measure that captures the downside protection provided by these stocks is beta, which calculates an individual stock's volatility versus the overall market. Any beta below 1.0 indicates a stock that is less volatile than the market. The calming effect of lower beta is most apparent during periods of stock market decline.
We suggest investors consider stocks with low beta (less than 1), which tend to be less volatile with rising dividend yield.
Choosing the Right Stocks
We have used the
Zacks Stock Screener to narrow down on three stocks that provide regular dividends with low beta and have a favorable Zacks Rank. Becton, Dickinson and Company (also known as BD) is witnessing significant improvement in base revenues and robust performances by the majority of its segments. BD Medical segment’s Medication Delivery Solutions business recorded strong growth in the United States in the reported quarter, particularly in catheters and vascular care products. The strength in Pharmaceutical Systems on the back of continued strong demand for pre-fillable devices enabled by capacity expansion is promising. BD has collaborated with ReturnSafe (the all-in-one software solution for COVID-19 employee health, safety and compliance) in February to integrate the BD Veritor At-Home COVID-19 Test directly within the ReturnSafe testing management platform. Moreover, a raised financial outlook for fiscal 2022 buoys optimism. Becton, Dickinson and Company Price
BD, carrying a Zacks Rank #2 (Buy), raised its
dividend six times in the past five years, with its payout growing 29% over the period. BDX has a 5-year annualized dividend growth rate of 3.55%. It has a beta of 0.65. Phibro’s fiscal second quarter marked the highest single quarter of sales in the company's history. Robust performances by the Animal Health and Mineral Health segments buoy optimism. The company’s raised revenue and EPS guidance for fiscal 2022 on improving business trends instill confidence in the stock. Phibro’s existing operations and established sales, marketing and distribution network in more than 75 countries provide it with ample scope to take advantage of global growth opportunities. Moreover, Phibro is focusing on new developments along with incremental registrations and growing volumes of existing nutritional specialties and vaccine technologies. Phibro Animal Health Corporation Price
Phibro, carrying a Zacks Rank #2, raised its
dividend once in the past five years, with its payout growing 38% over the period. PAHC has a 5-year annualized dividend growth rate of 4.71%. It has a beta of 0.52. McKesson’s strong position in the Distribution market continues to favor the stock. The company played a crucial role in the COVID-19 response efforts in the United States and abroad via the distribution of COVID-19 vaccines, ancillary supply kits and COVID-19 tests. The company played a key role in the COVID-19 response efforts in the United States and abroad by distributing COVID-19 vaccines, ancillary supply kits and COVID-19 tests. Its strong business model and differentiated capabilities aided business growth and delivered value to shareholders. Furthermore, McKesson continues to actively pursue deals, divestitures and acquisitions to drive growth. McKesson Corporation Price
McKesson, carrying a Zacks Rank #2, raised its
dividend five times in the past five years, with its payout growing 8% over the period. MCK has a 5-year annualized dividend growth rate of 8.41%. It has a beta of 0.72. UnitedHealth Group’s top line has been growing and the momentum should continue in the years ahead on the back of a strong market position and an attractive core business that continues to be driven by new deals, renewed agreements and expansion of service offerings. Its expansion of the health services segment and international business provides significant diversification benefits and shields against stringent regulations in the United States. For 2022, the company expects revenues in the range of $317-$320 billion, the midpoint of which indicates an upside of 10.7% from the 2021 reported figure. UnitedHealth Group Incorporated Price
United Health, carrying a Zacks Rank #2, raised its
dividend five times in the past five years, with its payout growing 31% over the period. UNH has a 5-year annualized dividend growth rate of 17.18%. It has a beta of 0.88. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.