The healthcare sector isn't exactly known for offering huge yields, with Health Care Select Sector SPDR (NYSEMKT: XLV) offering a yield of just 1.7%. If dividend investors take some time to dig into the sector, however, they can do much better. For example, Medtronic (MDT 0.67%) has a 3.3% yield today, and Alexandria Real Estate Equities (ARE 0.72%) is offering a yield of 7.4%. Here's what you need to know about each of these high-yield healthcare stocks.
What does Medtronic do?
Medtronic makes medical devices. It is one of the largest competitors in the space, making products across the cardiovascular, neuroscience, medical surgical, and diabetes categories. It has a leading position in each of the areas in which it operates, and it operates on a global scale.
Image source: Getty Images.
That said, the last few years haven't been the best ones for the company. Innovation, which is highly important in the healthcare space, can be lumpy. And given Medtronic's size, the business has become a little cumbersome. Growth has stalled out, and profitability has come under pressure. Investors have focused on the negatives pushing the shares lower and the dividend yield up toward the high end of Medtronic's historical yield range.
If you are a dividend investor that thinks in decades and not days, however, this is likely to be an investment opportunity. The company's innovation pipeline is starting to turn into new-product introductions. As new products gain traction, financial performance is likely to improve. And management has been working to streamline the business with cost cuts and a move to refocus on its most profitable operations. To that end, the company is set to spin off its lower-margin diabetes division in 2026. The move is expected to be immediately accretive to earnings, and the dividend policy isn't expected to change.
All in, Medtronic is doing what it needs to do to get back on the growth path. And that should support continued dividend increases; the medical device maker only has two years to go before it hits Dividend King status (50+ years of annual dividend increases). June could be an opportune time to buy the stock hand over fist.
What does Alexandria Real Estate do?
Alexandria is a real estate investment trust (REIT), which seems pretty far away from healthcare. Its primary focus is on office properties, which also seems a bit removed from healthcare. The key here is that the REIT owns biomedical research facilities, which combine research space and office space in one property. Both are important to each other since the research takes place in specialized space, while the analysis of that research takes place in a normal office environment. Alexandria is one of the largest pure play medical research REITs you can buy.
Alexandria counts some of the largest and most important medical research groups as tenants, from both the private side of the equation and the government side. However, like any landlord, the REIT's revenues will be impacted by the occupancy levels of its properties. And those rise and fall over time. Right now, occupancy is relatively weak, dropping to 91.7% at the end of the first quarter of 2025 from 94.6% at the end of 2024.
Swings like this happen from time to time, but Wall Street is treating Alexandria as if its dividend is at a material risk of being cut. Only the funds from operations (FFO) payout ratio in the first quarter was a fairly strong 57%. There's room for adversity before a dividend cut would be in order.
To be fair, office properties, and particularly highly specialized office properties, tend to have higher operating costs than other real estate assets. But it seems highly likely that Alexandria will manage its way through this weak patch and continue to extend its 15-year streak of annual dividend increases. For income lovers, this healthcare REIT is worth a deep dive in June.
There's always interesting stocks under the averages
The average healthcare stock has an uninspiring dividend yield. But the average is made up of many different companies, some of which actually have very attractive dividend yields. That list includes industry-leading companies like Medtronic and Alexandria Real Estate. You might just want to pick up shares in one, or both, of these high yielders before June is over after you get to know them a little better.
