3 healthcare stocks with high dividends

SSo far, 2022 has been brutal for growth stocks. A good place to hide might be the healthcare sector. It’s a great defensive play, because health care is as basic as food. And these stocks all pay a handsome dividend. Here’s why these three Motley Fool contributors love Amgen (NASDAQ: AMGN), Pharmaceutical Takeda (NYSE:TAK), and Pet Med Express (NASDAQ: PETS).

Expect a comeback from this biotech pioneer

Taylor Carmichael (Amgen): Amgen has been an under-par stock for quite some time. It has fallen 9% over the past year. And this underperformance made the title a loser against the S&P500 indexes over the past 10 years as well.

AMGN data by YCharts

See that little spike at the end of Amgen’s chart? That’s a lot of money paid to the biotech pioneer in December last year. The stock is up 13% since Dec. 1, 2021. So right now, Amgen is a nice happy place if your growth stocks have been bleeding lately.

Value investors flock to Amgen because biotech is both safe and cheap. Amgen made $26 billion in revenue last year. Biotech has 10 blockbuster drugs on the market, each grossing $1 billion or more last year.

Drug 3rd quarter turnover Growth rate (YOY)
Enbrel $1.2 billion (3%)
Prolia $803 million 15%
Otezla $609 million 13%
xgeva $517 million seven%
Neulasta $415 million (25%)
Aranesp $396 million 3%
Kyprolis $293 million 13%
Mvasi $274 million 19%
Nplate $273 million 29%
Repatha $272 million 33%

Data from Amgen’s Third Quarter Investor Presentation. YOY = year after year.

The stock’s underperformance made shares look cheap, trading at 11 times forward earnings. Amgen pays a dividend with a yield of 3%. Future growth drivers include cancer drugs Lumakras and Blincyto as well as Amgen’s biosimilar program. Next year, the company plans to launch Amgevita in the United States. It is a biosimilar to Humira, the world’s top-selling drug.

Amgen is a safe place to park your money during these turbulent times. I expect these stocks to outperform the market in 2022 and beyond.

A lab researcher wearing safety glasses and rubber gloves looks at a liquid in a lab flask.

Image source: Getty Images.

An underrated Japanese pharma

George Budwell (Takeda Pharmaceutical): Shares of Takeda Pharmaceutical have been on a downward spiral since the start of 2018. Investors pulled away from this healthcare stock due to three key overhangs. First, the Japanese pharma giant’s $62 billion acquisition of orphan drug specialist Shire in 2019 saddled it with a ton of debt. Second, Takeda is considering patent expiration for the top-selling ADHD drug Vyvanse in 2023. Third, the company’s hereditary angioedema drug, known as Takhzyro, appears to be losing market share in profit from BioCryst Pharmaceuticals‘ newly approved oral drug, Orladeyo. The net result is that Takeda shares have fallen more than 49% since January 1, 2018.

TAK chart

TAK data by YCharts

However, value and income-oriented investors may want to take advantage of this prolonged weakness in shares of the pharmaceutical titan for several good reasons. On the dividend front, Takeda shares boast an eye-catching 5.6% annualized dividend yield, which is among the highest in the large-cap healthcare equity sector. Takeda shares are also very cheap at current levels. Specifically, shares of the drugmaker are currently trading at less than nine times forward earnings. This is one of the lowest valuations in the pharmaceutical industry today. Finally, the drugmaker’s pipeline is also woefully underestimated by this dull market right now. After all, Takeda’s research and development platform has more than 40 assets in clinical studies, many of which have the potential for blockbuster sales.

All told, Takeda shares offer an attractive mix of above-average levels of passive income, a discounted valuation and a ton of deep value.

The cure for a stubborn wallet

Patrick Bafuma (PetMed Express): The health market is not just about humans; Fido and Fluffy also sometimes need medical attention. And with $8 billion in the prescription pet medicine market and $2 billion in the over-the-counter pet medicine market in the United States alone, PetMed Express has room to thrive. Not to mention, pet ownership has increased during the pandemic, with 7 out of 10 US households now owning a pet. This market growth should provide some security for the company’s 5% dividend yield.

PetMed is clearly a beloved and trusted brand. He recovers a healthy Net Promoter Score (NPS) of 82. This number is approaching NPS 86 Soft reported when first published. With 2.2 million unique customers over the past two years and an increase in average order size from $87 in Q3 2020 to $92 in Q3 2021, this pet-centric company also appears to be experiencing a boom. slow and steady growth.

I think the 5% dividend yield for that $500 million market cap is safe for the foreseeable future. PetMed is debt free with over $100 million in cash and is cash flow positive. Historically, its return on equity has been over 30%. Since launching its AutoShip & Save program in July 2021, the company has sought to continue to create higher lifetime value and recurring relationships with its customers – and to ensure the security of its payments.

10 stocks we like better than Amgen
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Patrick Bafuma has no position in the stocks mentioned. George Budwell has no position in the stocks mentioned. Taylor Carmichael has no position in the stocks mentioned. The Motley Fool owns and recommends Chewy, Inc. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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