Driven by an aging population’s increasing demand for services, Health Care sector companies have leveraged that demand into strong growth, and the four large-cap stocks below have rewarded their shareholders with asset appreciation in excess of 50% just over the past year.
An expanding sector of the economy certainly offers opportunities. However, there is also the danger that delivering incomplete or wrong solutions could be disastrous. Unfortunately, the recent example of the rise and fall of Theranos and Elizabeth Holmes could be just one indicator of a much larger problem.
All investing decisions carry risk and must be backed up by detailed research and analysis. Therefore, to mitigate some risk, investors must be extremely thorough when conducting due diligence, stock research and market analysis. Incomplete data and unreliable information, as well as other market distortions, can nullify the results of any analysis. Therefore, diversifying investments is crucial for long-term portfolio growth.
Investors must not diversify their investments only across different asset classes and different sectors. Diversification within a sector is also a good investment strategy. Instead of betting on just one stock seems to have prospects for tremendous growth, investors spread funds across several equities with similar growth potential. Betting on one stock that ends up being a big hit might look like a good decision. However, while spreading funds across several securities might reduce the overall total returns, this strategy will also minimize risk by a larger margin the potential loss of peak returns. The more conservative strategy is generally preferable because most investors are risk-averse. Moreover, the diversification strategy generally outperforms over the extended time horizon.
In addition to strong one-year growth, the four large-cap Health Care stocks below also delivered robust gains over the past five years and even provide their shareholders with quarterly dividend income payouts. Two of the equities have been paying dividends for more than two decades, which is a testament to their longevity.
Furthermore, these stocks represent large and established companies. The smallest of the four equities has a $17.3 billion market capitalization. The largest market capitalization is more than $130 billion, for an average of nearly $60 billion.
In addition to robust one-year returns of more than 50%, the total returns over the last three and five years were at least 130% and 160% respectively. On average, the shareholders have nearly tripled their investment over the last five years with these four equities. Sorted in ascending order by their one-year total return, the list below contains four large-cap health care stocks that have delivered to their shareholders capital gains of more than 50% just over the trailing 12 months.
4 Large-Cap Health Care Stocks That Delivered 50%-Plus Capital Gains in 2019: #4
ResMed, Inc. (NYSE:RMD)
Headquartered in San Diego, California, and founded in 1989, ResMed, Inc. develops, manufactures, distributes and markets medical devices and cloud-based software solutions that diagnose, treat and manage respiratory disorders.
Because its products and services provide crucial support for people with respiratory disorders, the company’s stock seems unaffected by market fluctuations. While many other stocks lost up to 90% of their value in the aftermath of the 2008 crisis, ResMed’s share price doubled between late 2008 and April 2010. Additionally, the share price has advanced nearly 10-fold since October 2008.
While asset appreciation provided almost all gains over the past year, ResMed paid a $0.39 quarterly dividend, which corresponds to a $1.56 annualized payout and a 1% forward dividend yield. Furthermore, the company has raised its annual distribution amount every year since introducing dividends in 2012. Over the past seven years, the company had more than doubled its annual dividend, which is equivalent to a 12.6% average annual growth rate.
With the small assistance from rising dividend payouts, ResMed delivered a total one-year return of nearly 53%. The company’s shareholders more than doubled their investment over the past three years with a 160% total return and enjoyed a 185% total return over the past five years.
4 Large-Cap Health Care Stocks That Delivered 50%-Plus Capital Gains in 2019: #3
Thermo Fisher Scientific, Inc. (NYSE:TMO)
Headquartered in Waltham, Massachusetts, and founded in 1956, Thermo Fisher Scientific, Inc. provides instruments, laboratory equipment, software, consumables, reagents and chemicals, as well as other medical supplies and services. The company operates through four business segments – Laboratory Products and Services, Life Sciences Solutions, Analytical Instruments and Specialty Diagnostics. In addition to its own research and manufacturing, Thermo Fisher Scientific has a strategic collaboration with NX Prenatal Inc., Evosep and Cedars-Sinai. Furthermore, the company has a research collaboration with Predictive Laboratories, a strategic manufacturing collaboration with Amicus Therapeutics, Inc. and a collaboration with Owlstone Medical.
The company’s $0.19 quarterly dividend corresponds to a $0.76 annualized payout and currently yields just 0.23%. After beginning dividend payouts in 2012, the company has paid a flat $0.60 annual dividend for six years. The upcoming payout on January 15, 2020, marks a third year of consecutive annual dividend boosts.
While collecting minimal dividend income, the company’s shareholders have enjoyed robust capital gains. Just over the past year, the share price rose 56.5% for a total return of nearly 57%. The shareholders more than doubled their investment over the last three years with a 132% total return. Additionally, the total return over the past five years was 160%.
4 Large-Cap Health Care Stocks That Delivered 50%-Plus Capital Gains in 2019: #2
Teleflex Incorporated (NYSE:TFX)
Based in Wayne, Pennsylvania, and founded in 1943, Teleflex Incorporated designs, develops, manufactures and supplies single-use medical devices for common diagnostic and therapeutic procedures for critical care and surgical applications. The company also provides interventional access products used in dialysis, oncology and critical care therapies, as well as cardiac care, anesthesia and pain management products.
While the stock lost more than half of its value during the 2008 financial crisis, the share price recovered fully by mid-2010. Since its after-crisis low in early 2009, the share price has risen nearly nine-fold. After pulling back nearly 15% in August and September 2019, the share price recovered all those losses to reach new all-time highs by the end of December.
The company has been paying dividends since 1977 and delivered a $1.36 annual distribution dividend per share in 2019. However, the high share price limited the dividend yield to less than 0.4%. After growing its annual payout at more than 10% per year between 1999 and 2009, Teleflex has paid the same $1.36 annual dividend for the past decade, which contributed to the marginal dividend yield.
However, even with a negligible dividend contribution, the share price growth was sufficient to deliver gains of nearly 63% over the trailing 12 months. Over the past three years, shareholders enjoyed a 134% total return and total returns reached 226% over the last five years.
4 Large-Cap Health Care Stocks That Delivered 50%-Plus Capital Gains in 2019: #1
Zoetis, Inc. (NYSE:ZTS)
Headquartered in Parsippany, New Jersey, and founded in 1952, Zoetis Inc. focuses on offering products and services for the fast-growing animal health care market. The company discovers, develops, manufactures and commercializes animal health medicines, vaccines and diagnostic products for livestock, as well as companion animals.
The company has hiked its annual dividend payout at an impressive rate of more than 20% per year since introducing dividend distributions in the second quarter of 2013. At this growth rate, the total annual payout has more than tripled over the past three years. The most recent boost of 22% raised the quarterly payout from the $0.164 amount paid in 2091 to $0.20 for the next distribution in March 2020. Despite the rising distributions, the total dividend amount was negligible in comparison to the share price of more than $370 per share, which suppresses the current dividend yield to approximately 0.6%.
After a brief decline driven by the overall market correction in late 2018, the share price recovered quickly and extended its general long-term uptrend into 2019. With minimal volatility the share price advanced 67.6% over the trailing 12-month period. Combined with the nominal dividend income contribution, asset appreciation delivered total gains of 150% and 206% over the past three and five years respectively.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.