3 Dividend Stocks That Offer High Yields Today
One industry offers the potential for significant yields to long-term investors.
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The U.S. healthcare sector is attractive for long-term investors, because the industry is set to benefit from a major growth tailwind: the aging population.
The U.S. is an aging country with a very large 65+ population. This means demand for healthcare is only set to grow going forward, at a rate above GDP growth.
For investors, the opportunity is in the many blue-chip stocks in healthcare that will provide shareholders with long-term growth and dividends.
These three healthcare stocks are attractive today for their high yields.
1. Organon & Co. (OGN)
Organon OGN is a pharmaceutical company that develops and markets health solutions in a variety of areas. The company’s established brands portfolio consists of nearly 50 products that have lost patent exclusivity and are used for treatment in the areas of cardiovascular, respiratory and dermatology and non-opioid pain management.
Organon’s women’s health portfolio includes fertility and contraception brands, such as Nexplanon/Implanon and Nuva Ring. The company also has a small portfolio of biosimilars which are used in immunology and oncology.
On August 6, 2024, Organon announced second-quarter results for the period ending June 30, 2024. For the quarter, revenue of $1.61 billion was unchanged from the prior year, but was $10 million below expectations. Adjusted earnings per-share of $1.12 compared unfavorably to $1.31 in the prior year, but was $0.04 ahead of estimates. Excluding the impact of currency exchange, revenue grew 2% for the year.
For the quarter, revenue for Established Brands, which contributed 60% of the total, fell 1% as gains from recent licensing agreements and a recovery in certain injectable steroid products was offset by weaker volumes in China and price revisions in Japan. Women’s Health, which contributed 28% of sales, continued to see a return to growth, with sales higher by 3% year over year.
Growth continues to be driven by the ongoing higher demand for fertility products, offset by generic competition in some contraceptive items. Sales for biosimilars increased 22% due to high uptake rates for Hadlima and continued demand for Ontruzant.
Organon does have several factors working in its favor for future growth. The established brands business should provide Organon with strong cash flows as the off-patent products do not require much in the way of the research and development expenses. The women’s healthcare business has long been a pioneer in its field since its founding in 1923.
The company produced the first-ever hormonal oral contraceptive as well the first-ever lower-dose estrogen combined oral contraceptive. More recently, Organon developed the first once-a-month contraceptive ring. Biosimilars are the smallest portion of the new company, but Organon does expect to expand its portfolio.
OGN currently yields 5.6%.
2. Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb BMY was created when Bristol-Myers and Squibb merged on October 4, 1989. Bristol-Myers can trace its corporate beginnings back to 1887. Today, this leading drug maker of cardiovascular and anti-cancer therapeutics has annual revenues of about $45 billion. On December 6, 2023, Bristol-Myers raised its quarterly dividend 5.3% to $0.60.
On July 26, 2024, Bristol-Myers announced second quarter results for the period ending June 30, 2024. For the quarter, revenue grew 8.9% to $12.2 billion, topping estimates by $680 million. Adjusted earnings-per-share of $2.07 compared favorably to $1.75 in the prior year and was $0.44 better than expected. Adjusting for unfavorable currency exchange, revenue improved 11% for the quarter. U.S. revenues increased 13% to $8.5 billion while International declined 1%.
Revlimid, which treats myeloma, decreased 8% to $1.35 billion. Eliquis, which prevents blood clots, grew 7% to $3.42 billion due to ongoing higher demand in the U.S. Eliquis remains the top oral anticoagulant outside of the U.S. and generated more than $12 billion in revenue for 2023, which was a 4% increase from the prior year. Opdivo, which treats cancers such as advanced renal carcinoma, was higher by 11% to $2.39 billion due to demand growth in both the U.S. and international markets.
Revenue for Orencia, which treats rheumatoid arthritis, was higher by 2% to $948 million. Adjusted gross margins contracted 120 basis points to 73.2%. Bristol-Myers provided updated guidance for 2024 as well. The company now expects revenue to be in the low single digits.
The company’s competitive advantage is its ability to either create (through research and development) or acquire patents for pharmaceuticals with high potential revenue. Bristol-Myers' top-selling pharmaceuticals, such as Opdivo and Eliquis, have largely shown solid growth rates and are expected to see high peak annual sales, though the former has now lost patent exclusivity in certain markets.
The addition of Celgene has added to the top and bottom lines. Bristol-Myers saw earnings increase during the last recession, which is quite normal for healthcare companies. Even in a recession, people will seek treatment for health problems.
BMY stock yields 4.9%.
3. CVS Health (CVS)
CVS Health Corporation CVS is an integrated healthcare services provider that operates a pharmaceutical services business, along with the country’s largest chain of pharmacies. The company operates more than 9,900 retail locations and 1,100 medical clinics, and services more than 102 million plan members. CVS Health Corporation generates annual revenues of about $369 billion.
On August 7, 2024, CVS Health Corporation announced second quarter results for the period ending June 30, 2024. For the quarter, revenue improved 2.6% to $91.2 billion, but this was $230 million less than expected. Adjusted earnings-per-share of $1.83 compared very unfavorably to $2.21 in the prior year, but was $0.10 more than expected. Revenues for Health Services, formerly known as Pharmacy Services, decreased 8.7% for the quarter, with pharmacy claims processed falling 18.3% to 471.2 million.
As with the prior quarter, this decrease was largely attributed to Tyson Foods TSN dropping CVS Health Corporation as its pharmacy benefit manager. Revenues for the Pharmacy & Consumer Wellness segment, formerly known as Retail/LTC segment, increased 3.5% while prescriptions filled grew 3.6% to 420.4 million. Total same store sales improved 6% with Pharmacy also higher by 6% compared to the prior year. Revenues for Health Care Benefits grew 21.7%, while total memberships increased 5.5% to 27 million.
CVS Health Corporation provided an updated outlook for 2024 as well, with the company now expecting adjusted earnings-per-share of $6.40 to $6.65 for the year. The acquisition of Aetna, which had nearly 40 million members at the time of purchase, offered CVS Health Corporation a significant increase in the number of potential customers.
It is also a positive that the company was able to pay down a sizeable amount of debt in recent quarters. We reaffirm our projection for 6% earnings-per-share growth for CVS over the medium-term due to revenue increases and the acquisition of Oak Street Health.
CVS currently yields 4.5%.
At the time of publication, Ciura had no positions in any securities mentioned.