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High-Yield Healthcare Investments You Can Buy Right Now

By Keith Speights - Apr 18, 2017 at 10:41AM

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Want high dividend yields? Check out healthcare stocks AbbVie, Pfizer, and Novo Nordisk.

If you're looking for high-yield investments, you might want to consider the sector that accounts for nearly one-fifth of the nation's economy. I'm talking about healthcare, of course.

Three healthcare stocks in particular boast high dividend yields and good overall prospects. Here's why AbbVie (ABBV 1.93%), Pfizer (PFE 3.00%), and Novo Nordisk (NVO 3.40%) are high-yield healthcare investments you can buy right now.

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AbbVie: Great dividend and a strong pipeline

AbbVie's dividend currently yields 3.91%. What makes the biotech's dividend even more attractive is that AbbVie has increased its dividend by 60% since 2013, when it was spun off from parent Abbott Laboratories (ABT 3.05%). AbbVie uses around 63% of its earnings to pay out dividends, which leaves room for more increases in the future.

The company's earnings picture could improve quite a bit over the next few years. Sales for several of AbbVie's current products are growing. That's especially true for cancer drug Imbruvica, which saw sales more than double in 2016. AbbVie should also enjoy success with another cancer drug approved last year, Venclexta. 

AbbVie's pipeline could produce multiple big winners. Elagolix is in late-stage clinical studies for the treatment of endometriosis and uterine fibroids. Two late-stage candidates for treating autoimmune diseases, risankizumab and ABT-494, also hold significant potential.

The biggest knock against AbbVie is that Humira could face heavier competition in the days ahead. One biosimilar to Humira has already won regulatory approval in the U.S. and Europe, although AbbVie is attempting to use the court system to fend off the rival in the U.S. 

Pfizer: Ibrance and acquisitions leading the way

Pfizer isn't too far behind AbbVie, with a dividend yield of 3.75%. The big drugmaker's dividend has increased by 60% since 2011. Although Pfizer is currently paying out more in dividends than it's making in profit, that should change in the near future. 

At least a dozen of Pfizer's top products enjoyed double-digit percentage sales increases in 2016. The fastest growth belonged to cancer drug Ibrance, which became the company's fourth best-selling drug in only its second full year on the market. Pfizer also experienced exceptionally strong revenue growth for rheumatoid arthritis drug Xeljanz. 

Thanks in part to several acquisitions, Pfizer looks to be in good shape for more growth in the future. The company's purchase of Anacor in 2016 has already resulted in an approved product, atopic dermatitis drug Eucrisa. Pfizer also bought Medivation last year, gaining prostate cancer drug Xtandi. The drugmaker's pipeline is loaded with promising candidates, including cancer drug avelumab, which recently won approval for its first indication.

The most significant headwind for Pfizer is declining sales for products that have either lost patent exclusivity or will soon do so. Fall revenue for blockbuster cholesterol drug Lipitor is especially problematic. However, Pfizer's newer drugs and growing sterile injectables businesses should continue to offset these sales decreases.

Novo Nordisk: High-yield dividend and a winning diabetes franchise

Novo Nordisk claims a nice dividend yield of 3.15%. The drugmaker's dividend seems likely to increase in the future, since Novo Nordisk currently uses just over 62% of earnings to fund its dividend program.

Diabetes is the company's primary focus. Sales for Novo Nordisk's newer insulin products, particularly Tresiba, are growing. Type-2 diabetes drug Victoza also continues to perform well. In addition, growth hormone therapy Norditropin is enjoying considerable success.

Novo Nordisk has high expectations for Xultophy, which is a once-daily single-injection combination of Tresiba and Victoza. The drugmaker awaits regulatory approval for two other diabetes treatments, fast-acting insulin aspart and semaglutide.

The company's hemophilia business hasn't performed all that well recently. However, Novo Nordisk could see better results with hemophilia drug N9-GP wins approval. Another hemophilia candidate, N8-GP, is in a late-stage clinical study. The company also faces pricing pressure in the U.S. for its diabetes and growth hormone products. Still, Wall Street analysts expect Novo Nordisk to grow earnings by an average annual rate of nearly 10% over the next few years.  

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
$51.59 (3.00%) $1.50
Novo Nordisk A/S Stock Quote
Novo Nordisk A/S
$112.12 (3.40%) $3.69
AbbVie Inc. Stock Quote
AbbVie Inc.
$152.34 (1.93%) $2.89
Abbott Laboratories Stock Quote
Abbott Laboratories
$109.45 (3.05%) $3.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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