7 Dividend-Paying Healthcare Stocks for Income Investors

Stocks to buy

With the equities sector falling flat while the cryptocurrency arena skyrockets, the difficulties associated with planning next moves help drive the bullish case for dividend-paying healthcare stocks. As a defensive play, the broader wellness ecosystem should instill confidence. After all, regardless of economic conditions, people will need access to various medical services and products.

On a related note, healthcare stocks for income march higher based on a non-cyclical demand profile. Stated differently, this market subsegment isn’t heavily influenced by economic cycles. Rather, long-term trends such as the massive and aging baby boomer population along with the prevalence of chronic diseases should help feed consistently rising dollars into the space.

To be blunt, you’re probably not going to get rich with healthcare dividend stocks. Let’s face it: when companies decide to reward shareholders rather than expand their business footprint, you’re likely dealing with a mature enterprise within an established industry. Nevertheless, when faced with an ambiguous market backdrop, dependability should be a top priority.

On that note, below are the dividend-paying healthcare stocks to consider during these tough-to-decipher times.

UnitedHealth Group (UNH)

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A multinational managed healthcare and insurance company, UnitedHealth Group (NYSE:UNH) represents the largest company of its kind by revenue. It’s also the biggest insurance company by net premiums. Since the beginning of the year, UNH returned a bit over 6%, which isn’t that remarkable. However, shares have moved up nearly 4% in the trailing five sessions, demonstrating a possible resurgence.

One critical factor that helps lift UNH as one of the dividend-paying healthcare stocks is its apparent insulation from rising prices. While inflation devasted other enterprises, UnitedHealth enjoys consistent revenue growth. In addition, the company’s gross profit margin has been steadily increasing since fiscal year 2021. That suggests the business commands pricing power, which makes sense given its underlying criticality.

Now, with all the inherent predictability of the business, UnitedHealth only features a modest forward yield of 1.37%. However, the payout ratio sits at 26.94%, implying supreme sustainability of the yield. Lastly, analysts rate shares a strong buy with a $592.50 average price target.

US Physical Therapy (USPH)

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Based in Houston, Texas, US Physical Therapy (NYSE:USPH) bills itself as one of the largest publicly traded, pure-play operators of outpatient physical and computational therapy clinics. Further, the underlying clinics provide pre-and post-operative care for a variety of orthopedic-related disorders and sports-related injuries. Since the January opener, USPH gained almost 8%, which again isn’t that remarkable of a performance.

Still, it makes a case for dividend-paying healthcare stocks due to the underlying relevance. According to Grand View Research, the U.S. physical therapy services market reached a valuation of $44.8 billion last year. Further, experts project that the segment will gradually expand at a compound annual growth rate (CAGR) of 3.56% to 2030, culminating in sector revenue of $58.6 billion.

While it doesn’t have the most exceptional financials, US Physical Therapy posted at least 10 years of profits over the past decade. Subsequently, the company offers a forward yield of 1.96%, a bit above the sector average of 1.58%. Also, analysts unanimously peg USPH a strong buy with a $110 price target.

Select Medical (SEM)

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One of the largest providers of critical illness recovery hospitals, Select Medical (NYSE:SEM) also specializes in inpatient rehabilitation hospitals, outpatient rehabilitation centers, and occupational health clinics in the U.S. To clarify, Select’s website states that it specializes in the continuum of care. In other words, following a critical illness or injury, the company works with patients to get them back to their normal lives.

In full disclosure, SEM ranks among the riskier ideas for healthcare stocks for income. Since the start of the year, SEM slipped more than 6%. However, investors may take confidence in the enterprise’s consistent profitability, along with better-than-average operating and net margins. Further, SEM trades at only 9.97x forward earnings, far lower than the sector median of 23.7x.

Looking at the passive income, Select carries a forward yield of 2.15%. While that’s not a blisteringly hot yield, the payout ratio sits at only 21.85%. Moreover, analysts rate SEM a strong buy with a $31 price target, making it a solid candidate for dividend-paying healthcare stocks.

CVS Health (CVS)

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Best known for its retail pharmacy business, CVS Health (NYSE:CVS) also plies its trade in the pharmacy benefits manger and health insurance arenas. As a result, CVS ranks among the top healthcare dividend stocks. That said, the market hasn’t been too kind to the company’s shares, which lost almost 24% of equity value.

Fundamentally, CVS faces significant competitive headwinds and potential disruptions. A notable example is Amazon (NASDAQ:AMZN) and its PillPack unit, a certified U.S. retail pharmacy. Nevertheless, CVS benefits from entrenched brand awareness and loyalty. That may be particularly true of older demographics – the very cohort that drives the broader case for dividend-paying healthcare stocks.

Despite the obstacles, the company marches ahead, though I would like to see improvement in gross margins. On the positive side, CVS trades at a low forward earnings multiple of 8.35x. Right now, it offers a forward yield of 3.41% and a very sustainable payout ratio of 28.43%.

In closing, analysts peg CVS a strong buy with a $87.73 price target, making a solid case for healthcare stocks for income.

Premier (PINC)

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Labeling itself as a healthcare improvement company, Premier (NASDAQ:PINC) features an alliance of approximately 4,350 U.S. hospitals and health systems and more than 300,000 other providers and organizations. Per its website, Premier created one of the most comprehensive databases of actionable data, clinical best practices and efficiency improvement strategies. Though a relevant offering, PINC suffered a huge loss of more than 41% since the January opener.

Still, for those that can handle the heat, Premier might rank among the more compelling dividend-paying healthcare stocks. First, the enterprise enjoys a large total addressable market. Per Grand View Research, the global healthcare analytics market size will reach a valuation of $43.1 billion this year. By 2030, the sector could see revenue of $167 billion. That comes out to a CAGR of 21.1%.

Second, Premier enjoys a stable balance sheet and is consistently profitable. Naturally, the latter attribute helps fuel the forward yield of 4.05%. Also, the payout ratio comes in at a very reasonable 39.61%. Analysts rate PINC a moderate buy with a $24.67 price target, making an intriguing case for healthcare dividend stocks.

Spok Holdings (SPOK)

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For those who want to dial up the risk-reward factor for their dividend-paying healthcare stocks, Spok Holdings (NASDAQ:SPOK) might be your ticket to the fast lane. According to its website, Spok specializes in delivering clinical information to care teams to help improve patient outcomes. Further, its secure platform automates clinical workflows for various activities, including patient alerts and test results.

While the business sounds compelling, SPOK lost more than 12% of equity value on Tuesday. That doesn’t take away from the incredibly robust return of nearly 75% since the January opener. Still, investors may want to wait out the volatility before considering moving in. One problem for investors could be that since 2011, the company suffered annual erosion of its top line.

Still, the trailing-12-month (TTM) sales is above 2022’s result, which might be an early sign of a recovery. Also, for the adventurous, the company offers a forward yield of 8.43% (though with a payout ratio of 122.55%).

Lastly, Lake Street’s Eric Martinuzzi pegs SPOK a buy with a $15.50 price target.

Walgreens Boots Alliance (WBA)

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For the most contrarian of investors, Walgreens Boots Alliance (NASDAQ:WBA) represents a largely speculative idea among dividend-paying healthcare stocks. As an integrated healthcare, pharmacy and retail leader, Walgreens plays a vital role in the healthcare ecosystem. However, as mentioned with CVS, that dominance may suffer competitive challenges. Since the start of the year, WBA lost nearly 45% of equity value.

Unfortunately, no one really knows when the bottom will be printed. In the past 52 weeks, the red ink expands to a loss of over 49%. In the trailing five years, WBA is off the mark by almost 75%, a staggering figure. Again, it’s a good time to remind investors of Walgreens’ speculative nature. If that wasn’t bad enough, investment data aggregator warns that WBA could be a possible value trap.

However, I suppose if you’re looking for an extreme value proposition, it’d be difficult to outbid WBA. Currently, it runs a forward earnings multiple of 6.15x. Also, the market prices share at a revenue multiple of 0.13x. On the passive income front, Walgreens offers a forward yield of 9.36%. Also, the payout ratio isn’t terrible at 57.66%.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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