As a result of continuing advancements in medical treatments and technology, the global population of individuals over age 65 is projected to rise from 703 million in 2019 to 1.5 billion by 2050.
Families will be able to spend more time with loved ones due to extended life expectancies. And there is also a benefit to the healthcare sector: a growing number of individuals that require regular medical care.
Here are a couple of blue-chip healthcare stocks that appear to be priced at discounts. But they also seem poised to do well over the long run for investors.
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1. Stryker: A medical devices giant
With nearly 12,000 patents on medical devices across therapy areas, including neurosurgery, orthopedics, and emergency care, few medical device companies can match the reach of Stryker (SYK -0.62%). In fact, the company estimates that its products impact an astonishing 100 million-plus patients each year.
Stryker has built a culture of creativity through its spending on research and development. With the company having spent $1.2 billion on research and development in 2021 alone (7% of total sales), Stryker is continuing to foster the same imaginative spirit that has made it so successful.
If the company's inventive characteristics weren't attractive enough, investors will be further enticed by the promising medical devices industry forecast resulting from favorable demographics. The market research firm Precedence Research anticipates that the global medical devices industry will compound at 5.5% annually from $550 billion in 2021 to $850 billion by 2030. Analysts believe that Stryker will capitalize on strong industry growth trends, which explains the projection of 8% annual non-GAAP (adjusted) diluted earnings per share (EPS) growth for the next five years.
Compared to the S&P 500 index's 1.7% dividend yield, Stryker's 1.2% yield leaves a bit to be desired by income investors. But with the stock's dividend payout ratio set to come in around just 30% in 2022, Stryker could easily deliver annual dividend growth of around 10% over the next few years.
Topping it all off, the stock's forward price-to-earnings (P/E) ratio of 23 is slightly below the medical devices industry average of 24.1. This makes Stryker an interesting medtech stock to buy at the moment.
2. Cigna: A leading managed care company
Cigna's (CI 1.03%) customer base of more than 190 million people in 30 countries positions it as one of the largest managed care businesses in the world. The company's tremendous underlying customer base explains how it has grown to a market capitalization of $98 billion.
As unbelievable as it may seem based on Cigna's massive size, the company hasn't scratched the surface of its full potential. This is because the $180.7 billion in revenue that analysts are forecasting in 2022 from Cigna is a drop in the $2 trillion-plus bucket that is the global health insurance market.
And as the global population ages and more individuals require access to healthcare, the appeal of health insurance will improve as the years unfold. This is why the market research firm Facts & Factors expects that the global health insurance market will increase at a 9.5% rate each year from $2.1 trillion in 2021 to $3.6 trillion by 2028. Thus, analysts are predicting that Cigna will generate 11.4% annual earnings growth over the next five years.
The stock's 1.4% dividend yield is a tad lower than the S&P 500 index's 1.7% yield. But with a dividend payout ratio expected to clock in below 20% in 2022, Cigna's future dividend growth should make up for its lower starting income.
And the cherry on top is that the stock's forward P/E ratio of 12.9 is well under the healthcare plans industry average of 16.8. Even when considering that Cigna's 11.4% annual earnings growth potential isn't quite in line with the industry average of 12.6%, the valuation is too cheap to ignore.
