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Investors looked to healthcare as a haven during last year’s stock market volatility. Now, with interest rates rising, some parts of the sector could reap even more profits from their dividends. “When I think about healthcare, I think of it as sustainable companies that sell what people need, not what they need,” said Art Hogan, chief market strategist at B. Riley Wealth Management. In healthcare, “you still have companies with good returns, so you get stability and good dividends.” The biotech and pharmaceutical industries have an average dividend yield of 2.6%, second only to the consumer goods, utilities and energy sectors. The top three dividend payers are well above average. Drug development instrument maker Viatris brings in 5.3%, Gilead Sciences 4.6%, and women’s health subsidiary Merck Organon 4.25%. But their high returns are partly due to the negative performance of their stocks. All three companies have fallen sharply over the past 12 months, with Viatris and Organon making new lows this week. “Shares are worth more than the dividends they pay out. Pharmaceutical demand will remain robust and has proven to play well in a slowdown/recession scenario,” said Gina Sanchez, CEO of Chantico Global. However, she added that “as yields continue to rise, they will face stiffer competition.” CNBC Pro has reviewed health care stocks with solid dividend yields that analysts like (over 50% recommend buying) and also outperform the market. Only two stocks have reached that level: drug maker AbbVie and pharmaceuticals and healthcare giant CVS Health. AbbVie has a dividend yield of 3.9% and more than half of analysts covering the company recommend it as a Buy. B. Riley’s Art Hogan called the stock one of his best dividends ever, noting that while the company’s best-selling drug Humira faces competition from biosimilars in 2023, the share price heavily devalues the company’s forecast growth rate of nearly 6%. Nearly two-thirds of analysts recommend CVS Health a Buy. The company, which includes pharmacy benefits as well as Aetna’s health insurance division, has a dividend yield of 2.1%. CVS shares are up 9% over the past three months, with the stock’s 50-day moving average now poised to rise above its 200-day average, a potentially bullish sign from a technical standpoint. While CVS signed an $8 billion deal to acquire Signify Health this month and signaled it wants to buy more assets to build its service portfolio, the company remains committed to paying dividends. This week, the board of directors approved a quarterly dividend of 55 cents per share.
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