Stocks paying high dividends are always the hot favourites among investors. These stocks promise good and consistent returns to the investors and are great sources for adding value. Though most of the sectors have stocks that pay high dividends, there are only a few sectors that have some great performers in them. One of them is the medical sector. This covers medical care and drug companies as well. This and related sectors like biotechnology, healthcare, etc. have been consistent even at times when the stock market is highly volatile. Let us look at some of the top stocks from this sector with a history of phenomenal dividend increases.
Expanding Medicare services and affordable health care
When we talk about companies that have a history of dividend increases and ones that promise the same in the future, the first one that comes to our mind is America’s biggest healthcare insurance company, UnitedHealth Group (UNH, Financial). They have lots of Medicare and medical assistance programs for individuals and corporates. They keep expanding their clientele to a great extent with every passing quarter and thus have an enviable geographical domination when compared to their competitors. One of the main reasons as to why UnitedHealth was able to increase its dividends by a whopping 34% on an average per year was the increasing number of enrolments into their Medicaid program. Enrollments increased because they were offered in joint participation with the Affordable Care Act (ACA). Last year this enrolment was limited only to around four states. This year, this is all set to cover 23 states. With an ever-increasing demand for medical care programs, UNH is all set to witness a high-dividend growth this year as well. Growth of dividends for the past few years is shown below:
Effective cost management
One of the big winners in terms of dividends last year was St. Jude Medical (STJ, Financial). This company, that manufactures medical devices did start off slightly hazily during the beginning of 2014 due to uncertainty in the health reforms segment. It had reported a drop of 3% in sales when 2014 started, which made many investors think twice before investing in this stock. However, St. Jude Medical came back strongly and silenced all its critics by finishing the year with a 6% increase in sales when compared to 2013. What made this turnaround possible? Effective cost management. The company was involved in some effective cost management strategies which not only helped it to emerge successful in the midst of a not so favorable enviorment, but also helped it to report an increase of 14% in its EPS for 2014. The trend of dividend paid out per share for the last few years is shown in the following graph:
Consistency is the key
The healthcare company Aetna (AET, Financial) is the next on the list of companies that have reported a high dividend increase in the last few years. With its consistently great earnings and EPS rates Aetna is the clear winner when compoared to other health insurers. One of the most striking features of Aetna is its ability to create value for its investors’ money. Over the last year, dividends worth $1 billion were paid out and repurchases worth $7.4 billion were done in a bid to provide maximum returns to shareholders. The compounded annual growth rate of top line sales and EPS for 2014 were 14% and 15% respectively. By the year 2018, EPS is expected go grow up to a phenomenal $10 per share, provided the company continues to take benefit from the increased demand for medicaid and its quality of health insurance services. Over the last five consecutive years, Aetna has been paying out more than reasonable dividends to its investors, and it is expected to continue this trend in the future as well. Dividend trends for the last few years is evident from this:
Conclusion
The healthcare, health insurance and the overall medical-cum-pharmaceutical industry has been growing at a good pace, thanks to favourable laws in the Affordable Care Act and other health care reforms. Hence the above companies are considered to be safe bets for this year and for the coming years as well for investors who are looking for good returns in the form of dividends. Their share prices might get impacted now and then due to changing market factors; however their dividends are all set to follow the same soaring growth trend for the next few years as well.
