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Four Healthcare Stocks That Pay More Than 4% Dividends

Ian Wyatt

Like food, water, and remote controls, healthcare is something human beings will always need.

We can debate exactly how bungled America’s healthcare system is – chances are you do this quite frequently. But regardless of how it’s paid for or packaged, the simple fact of the matter is that all of us require healthcare at some point in our lives.

Demand for healthcare will never wane. And thus, there will always be a need for healthcare providers. That’s why the healthcare industry is one of the most profitable sectors on the planet. According to Forbes, four of the 10 most profitable professions by net profit margin are in the healthcare sector.

With so much cash on hand, healthcare stocks are typically among the most reliable and generous dividend payers on the market.  The average dividend yield among healthcare stocks in 2011 was 3.7%, trailing only telecommunications stocks (5.9% yield) and the ever-reliable utilities stocks (4.1%). Better yet, healthcare stocks posted an average gain of 6.6% last year during a time when the S&P 500 was flat.

Knowing that demand for quality healthcare isn’t going anywhere, some of the major players in the healthcare industry should continue to rake in cash even in a down economy. And as the cash flows, it’s reasonable to think that healthcare stocks will remain one of the highest-yielding sectors on the market.

Here are four healthcare companies that already pay higher dividends than the sector’s robust 3.7% yield:

  • Novartis (NYSE: NVS): 4.5% yield

Novartis is a multinational pharmaceutical company based in Switzerland. The company boasts a $131 billion market cap, a profit margin of 14.6%, and $15 billion in operating cash flow. That’s how Novartis manages to pay a generous annual dividend of $2.48 per share – a payout the company has increased every year since 1996. In fact, Novartis’ dividend has more than doubled from $1.15 per share since 2005. With profits rising for each of the last three years and given the company’s diverse inventory of drugs (treating everything from cancer to multiple sclerosis to diabetes), Novartis should continue to be a steady dividend payer for years to come.

  • Merck & Co. (NYSE: MRK): 4.2% yield

Merck is a U.S.-based healthcare company that the “ETF Channel” recently labeled a Top 25 “dividend giant.” There’s a reason. The company bumped its quarterly dividend up to 42 cents per share in December, up from 38 cents a share. An agreement to extend its partnership with AstraZeneca (NYSE: AZN) – which sells the widely popular acid reflux drugs Nexium and Prilosec – another two years is expected to fetch the company an additional $200 million in revenue.

  • GlaxoSmithKline (NYSE: GSK): 4.8% yield

You’re probably familiar with many of the prescription and over-the-counter drugs GlaxoSmithKline sells. Nicoderm, Advair and Wellbutrin are among them. That’s why the British company is currently the No. 2 pharmaceutical manufacturer in the world. Its 4.8% yield may seem high – but that’s been its average for the past five years. That makes GlaxoSmithKline the leading dividend payer by yield among large-cap pharmaceutical stocks.

  • Eli Lilly & Co. (NYSE: LLY): 4.7% yield

Based in Indianapolis, Eli Lilly has long been one of the global leaders in the pharmaceutical industry. The company sells its products in more than 100 countries, and has been in business since 1876. The company has paid a dividend for almost the entirety of its existence – 126 years. While the company has been slow to grow its dividends of late – the quarterly payout has been stuck at 49 cents a share since 2009 – prior to that Eli Lilly had raised its dividends for 42 straight years. Even if there’s no increase in sight, you could do worse than the stock’s nearly $2-per-share annual payout and 4.7% yield.