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Tags: health care stocks | aging u.s. population | pfizer | baxter international | cigna | dividends

Bob Ciura: 3 Healthcare Stocks For Long-Term Growth & Dividends

A banner reading, "Science Will Win" at the world headquarters of Pfizer in New York. (AP)

Bob Ciura By Monday, 23 May 2022 01:45 PM EDT Current | Bio | Archive

The U.S. is an aging population. As of 2020, there were over 70 million Baby Boomers, defined as those born between 1946 and 1964. For investors, the implications are clear: the U.S. healthcare sector is likely to see sustained long-term growth.

There are many quality healthcare dividend stocks on the market, and this article will discuss 3 in particular that are attractive for long-term returns.

Healthcare Stock #1: Pfizer Inc. (PFE)

Pfizer Inc. is a global pharmaceutical company that focuses on prescription drugs and vaccines. The company generates annual revenue above $80 billion. Some of its top products are Eliquis, Ibrance, Prevnar 13, Enebrel (international), Sutent, Xtandi, and many more.

First-quarter revenue increased 82% operationally to $25.7 billion. Excluding the contributions from Comirnaty and Paxlovid, quarterly revenue increased 2% for the 2022 first quarter. Adjusted earnings-per-share increased 72% for the quarter.

Due to its continued growth, company management expects revenue in a range of $98 billion to $102 billion, while adjusted earnings-per-share are expected between $6.35 to $6.55 for 2022. These totals reflect sizable growth from 2021.

Pfizer’s current product line is expected to produce top line and bottom-line growth out to 2027 because of significant R&D and acquisitions. Eliquis (cardiovascular), Ibrance (oncology), Xtandi (oncology), Comiranty (COVID-19 vaccine), Vyndaqel/Vyndamax (transthyretin stabilizers), Inlyta (renal cell carcinoma), Hospital Products, and Biosimilars are all posting robust sales growth.

Future growth will come from increasing sales for approved indications, extensions, R&D, and bolt-on acquisitions. Pfizer has a strong pipeline in oncology, inflammation & immunology, rare diseases, and vaccines. We are expecting 5% earnings per share growth out to 2027, excluding the COVID-19 vaccine.

The stock has a 3.2% current dividend yield.

Healthcare Stock #2: Baxter International (BAX)

Baxter International is a diversified healthcare company. Revenue and earnings are spread across pharmaceuticals, renal care, medication delivery, nutrition, and more. The company develops and sells a variety of healthcare products, including biological products, medical devices, and connected care devices.

Baxter continues to generate strong growth. In the 2022 first quarter, adjusted earnings-per-share of $0.93 represented 22% year-over-year growth.

Acquisitions will help boost Baxter’s future growth. For example, Baxter acquired Hillrom in 2021 for $12.5 billion including debt. Baxter acquired Hillrom to pursue its vision to transform healthcare through technology. Indeed, Hillrom contributed $755 million of sales in the 2022 first quarter.

Baxter stock yields 1.6%, and the company regularly increases its dividend including a 4% raise in May 2022. The dividend appears highly secure, even with the major Hillrom acquisition. Even after Baxter

International issued long-term debt to finance the $10.5 billion Hillrom acquisition, the company still has conservative debt ratios, especially as it plans to deleverage. The low dividend payout ratio below 30% makes us believe that the dividend is safe and will continue to grow alongside the 10% projected earnings-per-share growth.

Healthcare Stock #3: Cigna Corporation (CI)

Cigna is an insurance company. It provides a variety of products including dental, medical, disability and life insurance. It operates four business segments: Evernorth, which provides pharmacy services and benefit management; U.S. Medical, which provides commercial and government health insurance; International Markets; and Group Disability. Evernorth contributes 70% of annual revenues while Cigna Healthcare accounts for 24%.

Cigna has annual revenues of approximately $180 billion. It has generated strong growth for many years. According to the company, it grew adjusted earnings-per-share by 15% per year from 2010 through 2021. Shareholders have benefited from the company’s impressive growth. Cigna stock produced total returns of 19.9% annualized in the past 10 years.

Growth has persisted in 2022, even with the U.S. economy on shaky ground. First-quarter revenue grew 7.4% to $44 billion. Adjusted earnings-per-share of $6.01 grew 27% year-over-year and handily beat analyst expectations. Cigna saw broad-based growth across its business segments. Total pharmacy customers grew 6.4% to 107.4 million, while total medical customers grew 6.6% to 17.8 million.

Cigna operates a business model that tends to hold up well during recessionary times as health insurance and pharmacy businesses are still in demand. Earnings-per-share fell from $3.96 in 2007 to $3.42 in 2008 (a 13.6% decrease), but rebounded to make a new high in 2009. Cigna has seen earnings-per-share grow each year thereafter outside of 016.

We feel that Cigna has some immense competitive advantages. The company is one of the largest names in its industry, giving it a size and scale that is hard to match. Cigna’s acquisition of Express Scripts appears to have been a solid move, strengthening the company’s presence in its pharmacy business. Perhaps most important, an aging demographic will need increased pharmacy and medical services, giving Cigna an incredibly large pool of potential customers.

Cigna stock has a 1.7% dividend yield and the company regularly boosts its dividend payout, including a 12% hike in February 2022.
Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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The U.S. is an aging population. As of 2020, there were over 70 million Baby Boomers, defined as those born between 1946 and 1964. For investors, the implications are clear: the U.S. healthcare sector is likely to see sustained long-term growth.
health care stocks, aging u.s. population, pfizer, baxter international, cigna, dividends
Monday, 23 May 2022 01:45 PM
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