36 'Safer' Dividend Healthcare WallStars For September

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Includes: A, ABBV, AMGN, ANTM, FMS, GILD, GRFS, JNJ, MCK, MDC, NVO, NVS, PFE, SNY, XRAY
by: Fredrik Arnold
Summary

Gilead took September's net gain "safer" Healthcare WallStar top spot. Its projected 21.82% net gain was 3% better than AbbVie's, and 29% more than Grifol's result, per analyst targets 9/10/18.

WallStars show positive broker target price upsides. 36 of 50 Healthcare sector WallStars are 'safer' because they showed positive one-year returns, and free cash flow yields greater than dividend yields.

Top 10 "safer" dividend Healthcare WallStar yields by MDT, GRFS, NVO, AMGN, JNJ, GILD, PFE, NVS, ABBV, SNY ranged 3.48-6.89%. Their free-cash-flow yields ranged 2.90-8.83%.

Besides safety margin, Healthcare WallStars also reported payout ratios (lower is better), total annual returns, dividend growth, and P/E ratios as of 9/10/18 to further validate their financial strengths.  Sorting for only positive total returns narrowed the list of 50 to 41.

Analyst one-year targets identified ten WallStars netting 23.28% more gain from $5k invested in the lowest priced five than from $5K invested in all ten.  Little low-priced stocks dominated September's 'safer' dividend Healthcare WallStars.

Actionable Conclusions (1-10): Brokers Estimated Top Ten High Yield Healthcare "Safer" Dividend Stocks to Net 11.1% to 21.82% Gains To September 2019

Five of ten top 'safer' dividend Healthcare stocks by yield (shaded in the chart above) were verified as being among the top ten gainers for the coming year. Thus, based on analyst 1-year target prices, the dog strategy for this Health group graded out as 50% accurate.

Projections based on estimated dividends from $1000 invested in the ten highest yielding Healthcare stocks and aggregate one-year analyst mean target prices for those stocks, as reported by YCharts, created the 2019 data points. Note: one-year target prices from one analyst were not applied (n/a). Ten probable profit-generating trades to 2019 were:

Gilead Sciences (GILD) netted $218.17 based on estimates from twenty-eight analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 2% more than the market as a whole.

Sanofi (SNY) netted $215.01 based on a median of estimates from four analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 14% less than the market as a whole.

Grifols (GRFS) netted $189.05 based on estimates from five analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 18% more than the market as a whole.

AbbVie (ABBV) netted $178.47 based on a median target price estimate from twenty-two analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 54% more than the market as a whole.

McKesson (MCK) netted $163.34, based on estimates from eighteen analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 25% more than the market as a whole.

DENTSPLY SIRONA (XRAY) netted $155.62 based on estimates from sixteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 20% more than the market as a whole.

Novartis AG (NVS) netted $148.99 based on estimates from four analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 16% under the market as a whole.

Agilent Technologies (A) netted $117.88 based on a median target from fifteen analysts, plus dividends less broker fees. The Beta number showed this estimate subject to volatility 38% over the market as a whole.

Fresenius Medical Care (FMS) netted $116.65 based on dividends plus median target price estimate from thirteen analysts less broker fees. The Beta number showed this estimate subject to volatility 69% below the market as a whole.

Anthem (ANTM) netted $111.04 based on median target price estimates from twenty-one analysts, plus projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 10% less than the market as a whole.

Average net gain in dividend and price was 16.14% on $10k invested as $1k in each of these ten Healthcare "safer" dividend stocks. This gain estimate was subject to average volatility 5% more than the market as a whole.

The Dividend Dogs Rule

The "dog" moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. Thus, the highest yielding stocks in any collection became known as "dogs." More specifically, these are, in fact, best called "underdogs."

The Healthcare 'Safer' Dividend Top Yield List Of 36 Included 9 Of Ten Sector Industries

Of ten healthcare industries composing the sector, nine were represented by the 36 WallStar firms whose stocks showed sufficient margins of cash to cover dividends by this screen as of September 10.

Industry representation broke out, thus: Drug Manufacturers - Major (5); Biotechnology (5); Medical Devices (4); Diagnostics & Research (4); Medical Distribution (2); Healthcare Plans (3); Medical Care (5); Medical Instruments & Supplies (6); Drug Manufacturers - Specialty & Generic (2); Long-Term Care Facilities (0).

The first three industries listed above populated the top ten of the healthcare 'safe' equities by yield.

36 of 50 Top Yield Healthcare WallStars Showed "Safer" Dividends

Periodic Safety Inspection

A previous article discussed the attributes of the 50 top yield Healthcare stocks on this master list.

You see grouped below the green tinted list of 36 that passed the Healthcare WallStar "safer" check with positive past-year returns and cash flow yield sufficient to cover their anticipated annual dividend yield. The margin of cash excess is shown in the bold face "Safety Margin" column.

Financial outcomes, however, are easily readjusted by boards of directors tinkering with company policies cancelling or varying the payout of dividends to shareholders. For example, Sanofi has paid a variable annual dividend over the years, as has Novartis. Pfizer (NYSE:PFE) on the list below cut their dividend in half in 2009, due to economic conditions, despite strong cash flow.

Three additional columns of financial data, listed after the Safety Margin figures above, reveal payout ratios (lower is better), total annual returns, dividend growth, and P/E ratio levels for each stock. This data is provided to reach beyond yield to select reliable payout stocks.

Limiting candidates to only those showing positive total annual returns, for example, narrowed the 50 on this list to 41 for this article. Positive results in all five columns after the dividend ratio is remarkable as a solid financial signal.

To quantify top rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high yield metric, analyst mean price target estimates became another tool to dig out bargains.

Yield Metrics Revealed Bargains From 5 Lowest Priced Top 10 Yielding "Safer" Dividend Healthcare WallStars

Ten "Safe" dividend Healthcare WallStars with the biggest yields September 10 per YCharts data ranked themselves by yield as follows:

Actionable Conclusions: Analysts Predicted 5 Lowest Priced of 10 "Safer" Dividend High Yield Healthcare Sector Stocks Will (11) Deliver 14.56% Vs. (12) 11.81% Net Gains from All Ten by September 2019

$5000 invested as $1k in each of the five lowest priced stocks in the ten "safer" dividend Healthcare Sector pack by yield were determined by analyst 1-year targets to deliver 23.28% more gain than $5,000 invested as $.5k in all ten. The fifth lowest priced "safer" dividend Healthcare dog, Gilead Sciences Inc. showed the best net gain of 21.82% per analyst targets.

Lowest priced five "safer" dividend Healthcare equities as September 10 were: Grifols SA; Pfizer; Sanofi; Novo Nordisk (NVO); Gilead Sciences, with prices ranging from $20.15 to $72.51.

Higher priced five "safer" dividend Healthcare equities as of September 10 were: Novartis; AbbVie; Medtronic (MDC); Johnson & Johnson (JNJ); Amgen (AMGN), with prices ranging from $82.53 to $202.50. This month, the little, low-cost 'safer' dividend stocks ruled this kennel.

This distinction between five low priced dividend stocks and the general field of ten reflects the "basic method" Michael B. O'Higgins employed for beating the Dow. The added scale of projected gains based on analyst targets contributed a unique element of "market sentiment" gauging upside potential. It provided a here and now equivalent of waiting a year to find out what might happen in the market. It is also the work analysts got paid big bucks to do.

Caution is advised, however, as analysts are historically 20% to 80% accurate on the direction of change and about 0% to 20% accurate on the degree of the change.

The net gain estimates mentioned above did not factor in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.

See my instablog for specific instructions about how to best apply the dividend dog data featured in this article, this glossary instablog to interpret my abbreviated headings, and this instablog to aid your safe investing. - Fredrik Arnold

Stocks listed above were suggested only as possible starting points for your safest "Safer" Healthcare dog dividend stock research process. These were not recommendations.

Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from www.ycharts. com; www.finance.yahoo.com; analyst mean target price by Thomson/First Call in Yahoo Finance. Dr.Dog photo: bocaveterinaryclinic.com

Disclosure: I am/we are long PFE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.