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The Dividend Champions spreadsheet and PDF have been updated through 2/28/11 and are available at here. Note that all references to Champions mean companies that have paid higher dividends for at least 25 straight years; Contenders have streaks of 10-24 years; Challengers have streaks of 5-9 years. Together, all of these companies may be referred to using the abbreviation “CCC.”

This is the fifth in a series of articles focusing on specific industries and isolating the CCC companies within those industries. The first four can be found under my articles page, beginning on March 2.

More than Drugs

The importance of Health Care companies is becoming clearer every day, both with the aging of the Baby Boomers (and their increased need for health care) and with the actions of state and federal governments, which are legislating mandates and regulations in an attempt to rein in costs. For many years, the segment was closely identified with major drug companies, and those companies still are an important part of the picture. But advancements in medical devices and procedures has brought to prominence a number of companies that provide medical tests, supplies, instruments, and devices that either take the place of drug therapies or enhance their effectiveness. So a well rounded portfolio may well include both pharmaceutical companies and medical products firms, which may have different growth and yield characteristics.

Many of the best known pharmaceutical companies are not on the list below for the simple reason that they have been unable to keep raising their dividends and, in some cases, have actually had to cut their payouts to shareholders. Pfizer (NYSE:PFE) was deleted in 2009 when it cut its dividend in half and Eli Lilly (NYSE:LLY) in 2010 when it failed to raise its dividend. Merck (NYSE:MRK) and Bristol-Myers Squibb (NYSE:BMY) were never CCC companies because their dividends remained unchanged for many years. The problem for many is now the specter of patent expirations, when well-known drugs will lose their exclusivity. And when top sellers are not about to lose patent protection, competitors are busy introducing alternatives that may cost less. Generic drug manufacturers are quick to introduce alternatives the moment patent protection lapses. So the Drug companies listed have accomplished something just by being able to extend their streaks of dividend increases.

The Companies

Healthcare companies don't make up a large segment of the CCC universe, with 10 Drugs companies and 16 other Medical products firms. But some of these offer above average yields, in contrast to the below average yield of the segment as a whole. The pressures mentioned above have kept stock prices down and driven yields up on high-quality companies like Abbott Labs and Johnson & Johnson, and the Drug group almost universally have recent double-digit dividend increases. There are a number of foreign firms included, but remember to consider tax withholding, which can be offset by claiming credits at tax time. For an investor looking to add one or more Healthcare companies to his or her portfolio, the table below should provide plenty of good choices. I'm again including as many columns of data as is practical, from a perspective of width and significance. Note that Beckman Coulter has agreed to be acquired.

No.

2/28

%

Payout

TTM

NY%

MktCap

DGR

DGR

Company

Symbol

Industry

Yrs

Price

Yield

Inc.

%Ratio

P/E

Growth

($Mil)

5-yr

10-yr

Abbott Laboratories

ABT

Drugs

39

48.10

3.99

9.09

64.86

16.25

7.41

74,440

9.7

8.8

AmerisourceBergen

ABC

Drugs

6

37.91

1.06

25.00

17.62

16.70

13.69

10,390

61.2

n/a

Astrazeneca plc

AZN

Drugs

7

49.17

4.90

15.31

43.27

8.83

-7.63

69,080

18.6

12.0

Cardinal Health Inc.

CAH

Drugs

21

41.64

1.87

11.43

29.21

15.60

14.62

14,560

32.0

25.7

Johnson & Johnson

JNJ

Drugs

48

61.44

3.52

10.20

45.19

12.85

5.99

168,820

10.6

13.0

Novartis AG

NVS

Drugs

10

56.27

4.18

18.40

55.23

13.21

5.45

128,830

18.2

6.3

Novo Nordisk A/S

NVO

Drugs

9

126.66

1.11

36.07

30.99

27.90

16.27

72,420

27.4

20.9

Perrigo Company

PRGO

Drugs

8

76.43

0.37

12.00

9.49

25.91

14.77

7,060

9.6

n/a

Shire plc

SHPGY

Drugs

7

85.01

0.81

16.50

10.95

26.90

13.29

15,530

15.1

n/a

Teva Pharmaceutical

TEVA

Drugs

12

50.10

1.74

17.20

23.83

13.69

11.76

44,990

22.7

33.6

Averages for

10

Drugs

16.7

63.27

2.35

17.12

33.06

17.78

9.56

60,612

22.5

17.2

Atrion Corp.

ATRI

Med Instrum.

8

176.34

0.95

16.67

16.28

17.09

n/a

355

20.3

n/a

Beckman Coulter

BEC

Med Instrum.

17

83.13

0.91

5.56

23.38

25.58

13.51

5,920

5.4

8.4

Becton Dickinson & Co.

BDX

Med Instrum.

38

80.00

2.05

10.81

29.55

14.41

10.71

17,690

15.5

14.9

Birner Dental Mgmt.

BDMS

Med Supply

7

19.23

4.16

17.65

94.12

22.62

n/a

36

17.9

n/a

C.R. Bard Inc.

BCR

Med Instrum.

39

97.76

0.74

5.88

13.53

18.38

10.33

8,310

7.0

5.5

Medtronic Inc.

MDT

Med Devices

33

39.92

2.25

9.76

30.00

13.31

6.76

42,870

19.0

16.9

Meridian Bioscience

VIVO

Med Instrum.

19

21.57

3.52

11.76

131.03

37.19

19.23

884

28.9

21.7

Mine Safety Appliances

MSA

Med Equip.

39

36.13

2.77

4.17

92.59

33.45

39.47

1,310

13.7

20.2

National Healthcare Cp.

NHC

HC Facilities

7

47.60

2.35

7.69

n/a

n/a

9.63

N/A

14.4

n/a

Owens & Minor Inc.

OMI

Med Equip.

14

31.20

2.56

12.99

45.71

17.83

8.78

1,950

15.3

15.7

Pharmaceutical Prod.

PPDI

HC Services

6

27.47

2.18

5.71

57.69

26.41

18.01

3,260

90.4

n/a

Smith & Nephew plc

SNN

Med Equip.

5

57.95

1.29

10.01

21.59

16.75

8.36

10,250

10.3

4.4

Span-America Medical

SPAN

Med Equip.

11

14.83

2.70

11.11

27.78

10.30

n/a

41

18.7

13.3

Steris Corp.

STE

Med Equip.

6

33.85

1.77

36.36

85.71

48.36

9.55

2,010

34.1

n/a

Stryker Corp.

SYK

Med Devices

18

63.26

1.14

20.00

22.57

19.83

10.51

24,750

46.1

33.9

West Pharmaceutical

WST

Med Instrum.

18

41.11

1.65

6.25

35.98

21.75

15.68

1,370

7.6

6.5

Averages for

16

Non-Drugs

17.8

54.46

2.06

12.02

48.50

22.88

13.89

8,067

22.8

14.7

Averages for

26

Healthcare

17.4

57.85

2.18

13.98

42.33

20.84

12.01

29,085

22.7

15.6

Averages for

447

CCC Co's

16.7

47.91

2.91

8.20

68.18

21.94

12.39

16,745

12.5

10.3

Summary

The Healthcare industry is a traditional source of average yields and there are clearly many that have established long histories of annual increases. Unlike the subjects of the first two articles in this series (MLPs and REITs), the taxation on these dividends is fairly straightforward, at the 15% (or lower) rate until at least the end of 2012. I expect that to be the case with future installments in this series that will focus on other industry/sector groups. As always, I welcome feedback in the Comments section below.

Next Up: Resource Stocks

Source: Dividend Champions: Focus on Healthcare