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3 Undeniably Awesome Health Care Dividend Stocks

By Keith Speights - Apr 12, 2013 at 10:20AM

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Forget ho-hum dividend stocks. These 3 health care companies sport dividend yields that will get any investor excited.

Looking for solid dividends? The health care sector has plenty of dividend stocks to choose from. However, just because a stock's dividend yield looks juicy now doesn't mean it will remain that way in the days ahead. Here are three health care dividend stocks that sport great yields and should keep those payments flowing.

From across the Big Pond
British drugmaker GlaxoSmithKline (GSK 2.00%) boasts one of the highest dividend yields of any health care company. Glaxo's forward yield currently stands at 5.9%. Over the past five years, the company paid an average dividend yield of 5%. 

The impressive thing about Glaxo's nice yield is that it doesn't derive at all from a depressed stock price. While the stock hasn't exactly skyrocketed, shares are up 7% for the year -- about the same as the S&P 500.

Glaxo does face the potential of revenue losses over the next few years stemming from patents expiring. Avodart goes off patent in 2015, while Lovaza and the Infanrix/Pediarix vaccines lose exclusivity in 2017. Overall, though, I think the company can overcome these challenges with new products and continue to reward shareholders with attractive yields.

Closer to home
Merck (MRK -0.46%) stands out as another pharmaceutical with a nice dividend. The large pharma currently pays a yield of 3.8%. That's lower than Merck's five-year average yield of 4.4% but still looks appealing.

Like GlaxoSmithKline, Merck's strong dividend yield isn't a reflection of any weakness in the stock price. Shares are up 10% so far in 2013 and have increased by 18% over the past 12 months.

Merck continues to bear the brunt of the loss of patent protection for Singulair. It has a decent pipeline that should help offset the revenue losses from Singulair, though. Insomnia drug suvorexant, in particular, looks promising. I don't expect that Merck will have any problems keeping the dividends flowing.

Paying the rent
Medical Properties Trust (MPW 1.85%) pays its dividends in large part by health care organizations paying their rent. The real estate investment trust, or REIT, leases facilities to health care providers including hospitals, medical office buildings, and wellness clinics. Medical Properties Trust's dividend yield stands at 4.8%. 

This REIT's recent stock performance has been nothing less than stellar. Shares have nearly doubled over the past year and are up more than 36% in 2013.

Can Medical Properties Trust sustain paying dividends at its current pace? I don't see any reason to think otherwise. More than 75% of its properties have leases that extend past 2020. 

Great dividend yields. Increasing share prices. All three have business models that should continue to prove successful over the long run. Glaxo, Merck, and Medical Properties Trust look solid.

No company or stock is perfect, of course. And risk is always part of the investing game. My view, though, is that all three of these health care dividend stocks aren't just ho-hum opportunities for investors. They're undeniably awesome.

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Stocks Mentioned

Merck & Co., Inc. Stock Quote
Merck & Co., Inc.
$90.41 (-0.46%) $0.42
GlaxoSmithKline plc Stock Quote
GlaxoSmithKline plc
$43.32 (2.00%) $0.85
Medical Properties Trust, Inc. Stock Quote
Medical Properties Trust, Inc.
$18.21 (1.85%) $0.33

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

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