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Where has the most revenue growth come from in Q2 2011? Looking at sales figures for the sectors shows that Energy and Materials are leading the pack, which isn't surprising, given the general rise in commodity prices earlier this year:

S&P-SALES-2011-08-29
Data source: Standard & Poors

Q2 2011 EPS by sector tells a similar story, with Energy and Basic Materials up at the top. Note that Telecoms, Tech and Industrials are also much improved from Q2 2010, while the much unloved Financials sector fell way behind:

S&P-EPS-2011-08-29
Data source: Standard & Poors

Looking forward, using 2011 and 2012 EPS estimates as a guide, Healthcare is thought to be poised for the most growth in 2012:

S&P-2011-2012-EPS
Data source: Standard & Poors

The healthy outlook for Healthcare is also supported by its 2011 market performance, where it has trailed only Utilities. Of course, the defensive nature of the top 3 sectors has also helped their performance in the bumpy year we've been having so far:

S&P-SECTOR-PERF-YTD2011-08-29
Data source: Standard & Poors

So which dividend-paying Healthcare stocks have the best combo of growth, valuations, and management metrics? We looked for dividend stocks with strong growth in their most recent and next fiscal years, low PEG ratios for the next fiscal year, attractive management figures, and low debt levels, and came up with a micro cap, a mid cap and a large cap with these characteristics:

S&P-TEVE-PMD-LNCR

Psychemedics Corp. (NASDAQ:PMD) has the highest dividend yield of the group, and is listed in our High Dividend Stocks by Sector tables.

PMD is a leading drug testing firm. Lincare Holdings (NASDAQ:LNCR) provides home respiratory care, infusion therapy and medical equipment. Teva Pharmaceuticals (NYSE:TEVA) is the world's largest generic drug manufacturer.

Valuations and Growth:

PMD has the most compelling growth figures, and it also has the lowest PEG ratio. TEVA and LNCR both had disappointing Q2 2011 EPS figures, but are estimated to turn their EPS around:

S&P-TEVA=PMD-PEG

Options: We've added TEVA to our Covered Calls and Cash Secured Puts tables.

Financials: This whole group has attractive financial metrics, but Debt-free PMD is the clear winner in the table below:

S&P-TEVA-ROE

Share Performance: Even with their strong metrics, these stocks have been beaten down in this summer's market malaise, and may offer interesting entry points:

S&P-TEVA-PERF

Disclosure: I am long PMD.

Disclaimer: This article is written for informational purposes only, and isn't intended as investment advice.

Source: Dividend Picks In The Booming Healthcare Sector