An AbbVie bio safety hood
Courtesy of AbbVie
Deep into the second quarter of the year, stocks have yet to recover, and investors are seeking safety in defensive plays.
One sector that’s benefited from this rush to defense is healthcare, where big firms offer stability and, in some cases, steady dividends.
While the S&P 500 index is down 6.4% so far in 2022, the Health Care Select Sector SPDR Fund (ticker: XLV), an exchange-traded fund that tracks healthcare stocks in the S&P 500, has slipped just 1.8%.
And while the SPDR S&P Biotech ETF (XBI), which focuses on smaller biotech stocks, is down 24.4% this year, the NYSE Arca Pharmaceutical index (DRG), which tracks large pharmaceutical firms, is up 3%.
Rallies by individual large-cap healthcare stocks have buoyed the performance of the indexes that track them. AbbVie
(ABBV) stock is up 17.7%, and shares of drug distributor Cardinal Health (CAH) have surged 22.3%.
Investors looking for defensive healthcare plays will look at a number of factors when choosing where in the healthcare sector to place their bets. One such factor is the dividend yield offered by companies, or the percentage of their share price paid out annually in dividends.
In order to seek defensive bets in the healthcare sector, we screened for the healthcare stocks in the S&P 500 with the highest dividend yields over the past year, as calculated by FactSet.
The resulting list consists of familiar large-cap names in pharmaceuticals, biotech, and drug distribution: AbbVie, Gilead Sciences (GILD), Merck
(MRK), Cardinal Health , Bristol-Myers Squibb (BMY), and Amgen (AMGN).
All have dividend yields of above 3%, according to FactSet, well above the average S&P 500 dividend yield of 1.4%. All but Gilead have seen their share prices gain considerably this year.
6 Defensive Healthcare Stocks
Selected healthcare stocks in the S&P 500 with dividend yields over 3%
| Company / Ticker | Dividend yield (%) | YTD Change (%) | Recent price |
|---|---|---|---|
| AbbVie / ABBV | 3.9 | 17.7 | $159.36 |
| Gilead Sciences / GILD | 3.9 | -15.2 | $61.58 |
| Merck / MRK | 3.4 | 12.3 | $86.07 |
| Cardinal Health / CAH | 3.4 | 22.3 | $62.98 |
| Bristol-Myers Squibb / BMY | 3.2 | 23.1 | $76.75 |
| Amgen / AMGN | 3.1 | 12 | $251.93 |
Source: FactSet
The stock that passed the screen with the highest dividend yield, per FactSet, is AbbVie, which in February announced a quarterly dividend of $1.41 per share. The company’s dividend has grown 124% over the past five years, according to FactSet, and it pays 84% of earnings out to shareholders as a dividend, compared to a 28.7% average for the S&P 500.
AbbVie shares have climbed this year, and are up 41.1% over the past 12 months.
Another stock that passed the screen, the large-cap biotech Gilead, announced a 2.8% dividend hike in February, raising its dividend to $0.73 per share. Gilead’s dividend has grown 48.2% over the past five years, according to FactSet.
Write to Josh Nathan-Kazis at [email protected]
