If you take a look at some of the stocks that have actually fared pretty well in recent weeks, healthcare comes to mind.
Some of the stocks in the sector – though certainly not all as you'll see – have a good track record for raising dividends every year. So I thought I’d take a look at which companies have been raising dividends and at their payout percentages.
If the percentage of earnings that a company pays as dividends gets too high, it might be forced to cut its dividend.
So here’s a look at five major healthcare stocks. The green columns show the annual dividend payment (scale at left). The purple line shows the payment percentage (scale at left) that I got from Value Line.
- Abbott Labs (ABT) Current yield: 3.70%
- Johnson & Johnson (JNJ) Current yield: 3.60%
Both of these companies are Dividend Aristocrats. They’re serial dividend raisers, each paying less than 50% out in earnings even as JNJ tripled its payments and ABT doubled its payments over the past decade.
- Eli Lilly (LLY) Current yield 5.20%
Eli Lilly hasn’t raised its dividend much at all, but its payout percentage has been constant.
- Merck (MRK) Current yield 4.80%
Merck’s dividend has been stuck at $1.52 for years, and its ratio did rise a bit past 100% in 2007, but its been around 40% since.
- Pfizer (PFE) Current yield 4.30%
Pfizer had been forced to lower its dividend a few years ago. And even in doing so, its payout ratio still remains much higher than earlier in the decade.
Of all these five companies, I own Abbott Labs. I kind of wish I owned JNJ as well.
Of the others, Pfizer, Lilly and Merck have higher yields. Lilly seems to be worth a closer look with a yield of 5.20%. But I’m steering clear of Pfizer and Merck for now.