Picking stocks that can thrive in just about any economic environment is often a major contributing factor to an investor's success. And it doesn't have to be complicated: Investors need to just focus on buying stocks that operate in sectors of the economy that are of utmost importance.
Healthcare is a sector that tends to do well no matter what's going on in the world. That is because patients rely on the goods and services provided by healthcare companies at all times. Here are two quality stocks that could build meaningful wealth for investors over the long haul and are currently intriguing buys.
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1. Humana: A leading managed care company
Health insurance is a necessity for most people. And with more than 22.3 million members for its medical, dental, and vision insurance products as of Sept. 30, Humana (HUM -5.18%) is a well-established provider.
Health insurance is arguably one of the very best industries in which to be a leader. As an aging population develops more chronic medical conditions, the health insurance industry is expected to grow as well. The market research firm Fortune Business Insights projects that the global health insurance market will compound at 5.5% annually from $2.1 trillion in 2021 to $3 trillion by 2028.
Thanks to Humana's growing Medicare Advantage customer base, analysts anticipate the company will generate 14.7% annual non-GAAP (adjusted) diluted earnings per share (EPS) through the next five years. For context, this is meaningfully higher than the healthcare plans industry average of 12.5%.
The company's 0.6% dividend yield is well below the S&P 500 index's 1.7% yield. And with the dividend payout ratio standing at a very modest 12%, Humana should have no issues delivering 15%-plus annual dividend growth over the next five to 10 years.
The stock's forward price-to-earnings (P/E) ratio of 18.3 is only slightly more than the healthcare plans industry average of 16.6. This makes Humana a no-brainer buy for dividend growth investors.
2. Abbott Laboratories: A healthcare giant
Abbott Laboratories' (ABT -0.86%) $192 billion market capitalization makes it one of the biggest makers of medical devices and other healthcare products in the world. Notably, the company has a diagnostics segment that notably sells the COVID-19 rapid test called BinaxNOW, a nutrition segment that sells nutritional shakes and baby formula, and an off-patent pharmaceutical segment. This provides Abbott with diverse revenue streams that can rise in just about any environment.
The outlook for its medical devices business looks promising. This is because Precedence Research predicts that the global medical devices industry will increase 5.5% each year from $550 billion in 2021 to $850 billion by 2030. That's one reason why analysts believe that Abbott will produce 8.3% annual adjusted diluted EPS growth over the next five years.
The stock's 1.9% dividend yield slightly tops the S&P 500 index's yield. Since Abbott's dividend payout ratio clocks in at just 36%, there should be room for additional dividend growth. This is why I would be surprised if there weren't many more dividend raises like the most recent 8.5% in the company's future.
Topping it off, Abbott's forward P/E ratio of 24.9 is in line with the average for the medical devices industry. That's a decent valuation for a world-class business such as Abbott, which makes it a solid buy for dividend growth investors.
