The strong demand for healthcare services due to rising chronic diseases and an aging population has been driving the growth of the healthcare industry over the past few years. The COVID-19 pandemic has led to rapid digital transformation in healthcare systems, including the evolution of telehealth. Furthermore, digital integration has accelerated the industry’s growth, supported by the increasing availability of advanced digital medical solutions, coupled with favorable initiatives by the government and private sectors. According to Grand View Research, Inc, the global digital health market is expected to reach $295.40 billion by 2028, growing at a 15.1% CAGR.
Healthcare stocks are considered attractive investments due to their ability to hedge against market uncertainties, given the inelastic demand for healthcare products and services. Fundamentally solid healthcare companies can pay high dividends and generate a steady income stream for the investors. The bullish sentiment surrounding the industry is evidenced by iShares U.S. Healthcare ETF’s (IYH) marginal gains over the past year.
Against this backdrop, we believe betting on high dividend paying healthcare stocks Gilead Sciences, Inc. (GILD), Takeda Pharmaceutical Company Limited (TAK), and GlaxoSmithKline plc (GSK) could be profitable now.
Click here to checkout our Healthcare Sector Report for 2022
Gilead Sciences, Inc. (GILD)
GILD is a biopharmaceutical company that discovers, develops, and commercializes medicines in various areas in the United States, Europe, and internationally. The Foster City, Calif., company provides Genvoya, Odefsey, Stribild, and Atripla products to treat HIV/AIDS, Veklury for the treatment of coronavirus disease 2019, Epclusa, Vosevi, and Viread to treat liver diseases, Ranexa for the treatment of chronic angina, and Tecartus, Yescarta, Trodelvy, and Zydelig products to treat hematology, oncology, and cell therapy.
On May 2, GILD and Dragonfly Therapeutics entered a strategic collaboration to develop Dragonfly’s novel natural killer (NK) cell immunotherapies for oncology and inflammation. Under the agreement, GILD will receive an exclusive and worldwide license from Dragonfly for the 5T4-targeting investigational immunotherapy program, DF7001. It will also grant options to license worldwide rights to develop and commercialize additional NK cell engager programs.
On April 19, GILD’s company, Kite, received U.S. FDA approval for a new state-of-the-art CAR T-cell therapy manufacturing facility in Frederick, Md. “The FDA approval of our Maryland site marks an important milestone within our global CAR T-cell therapy manufacturing network and will enable us to significantly expand our production capacity and further strengthen our ability to meet the needs of people living with difficult-to-treat blood cancers,” said Christi Shaw, CEO of Kite.
In its fiscal year 2022 first quarter, ended March 31, 2022, GILD's total revenues grew 2.6% year-over-year to $6.59 billion, while its product sales improved 3.1% from its year-ago value to $6.53 billion. The company's non-GAAP income from operations rose 2.9% year-over-year to $3.52 billion. In addition, its non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.68 billion and $2.12, respectively, registering an increase of 3.8% and 3.9% from the prior-year period.
GILD pays $2.92 as dividends annually, yielding 4.7% on its current share price. Its four-year average yield is 3.8%. Its dividend payouts have grown at 8.2% CAGR over the past five years.
Analysts expect GILD's EPS for its fiscal 2022 fourth quarter, ending Dec. 31, 2022, to come in at $1.41, representing a 104.9% rise year-over-year. The company has an impressive earnings history; it has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock gained marginally over the past month and closed Friday's trading session at $62.37.
GILD's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
GILD has an A grade for Value and a B grade for Quality. Within the Biotech industry, it is ranked #9 of 388 stocks. To see additional POWR Ratings (Growth, Stability, Sentiment, and Momentum) for GILD, click here.
Takeda Pharmaceutical Company Limited (TAK)
Headquartered in Tokyo, Japan, TAK researches, manufactures, develops, markets, and licenses pharmaceutical products worldwide. The company provides pharmaceutical products in neuroscience, oncology, gastroenterology, and rare diseases, including rare metabolic and hematology and hereditary angioedema. It offers its products under the Alofisel, Adynovate/Adynovi, Entyvio, Gattex/Revestive, Vpriv, Elaprase, Takhzyro, Hyqvia, Ninlaro, and Alunbrig brands.
Last month, TAK and CENTOGENE N.V. (CNTG), the commercial-stage biodata life science partner for rare and neurodegenerative diseases, announced an expansion of their partnership to provide access to genetic testing for patients with rare metabolic and rare neurodegenerative diseases. Under the agreement, CNTG will continue providing TAK access to diagnostic testing for patients globally. This partnership is expected to extend the company’s global market access and revenue streams.
In the same month, TAK received manufacturing and marketing approval from the Japan Ministry of Health, Labor, and Welfare (MHLW) for Nuvaxovid Intramuscular Injection, a novel recombinant protein-based COVID-19 vaccine for primary and booster immunization in individuals aged 18 and older. TAK will develop and manufacture the vaccine at its facility in Hikari. This MHLW approval might boost the company’s profitability.
In its fiscal year 2021, ended March 31, 2022, TAK's revenue increased 11.6% year-over-year to $29.39 billion. The company's other comprehensive income for the year, net of tax, grew 85% year-over-year to $4.89 billion and its total comprehensive income for the year rose 18.2% from the prior year to $6.79 billion. Its cash and cash equivalents and total current assets amounted to $6.99 billion and $21.36 billion, respectively, as of March 31.
TAK pays $0.66 as dividends annually and yields 4.8% annually on the current price.
The consensus revenue estimate of $27.54 billion for the fiscal year 2023 ending March 2023 represents a growth of 368.2% from the previous year. It is no surprise that TAK has surpassed the consensus revenue estimates in each of the trailing four quarters. Shares of TAK increased 4.1% in price year-to-date and closed Friday’s trading session at $14.35.
TAK's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B grade, which translates to Buy in our proprietary rating system.
TAK has an A grade for Value and a B for Stability. Within the Medical - Pharmaceuticals industry, it is ranked #31 of 167 stocks. To see additional POWR Ratings (Growth, Momentum, Quality, and Sentiment) for TAK, click here.
GlaxoSmithKline plc (GSK)
GSK discovers, develops, manufactures, and markets pharmaceutical products, vaccines, over-the-counter medicines, and health-related consumer products in the United Kingdom, U.S., and internationally. The company is based in Brentford, U.K. It operates through four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines; and Consumer Healthcare.
In January, GSK and Vir Biotechnology, Inc. (VIR) announced that the U.S. government purchased an additional 600,000 doses of sotrovimab, an investigational monoclonal antibody for the early treatment of COVID-19. The 600,000 doses of sotrovimab were delivered throughout the first quarter of 2022. GSK and VIR have received binding agreements for the sale of nearly 1.7 million doses of sotrovimab worldwide. It might boost the company’s global market reach and profitability.
GSK's turnover increased 31.8% year-over-year to £9.78 billion ($11.98 billion), while its gross profit rose 23.3% year-over-year to £6.09 billion ($7.46 billion) in its fiscal year 2022 first quarter, which ended March 31, 2022. Its adjusted operating profit improved 39% year-over-year to £2.61 billion ($3.20 billion). Its adjusted profit before tax grew 42% from the last year to £2.41 billion ($2.95 billion). The company’s adjusted profit attributable to shareholders and adjusted earnings per share came in at £1.65 billion ($2.02 billion), registering a 44% increase year-over-year.
Over the last five years, GSK's dividend payout has grown at a 1.6% CAGR. Its four-year average dividend yield is 5.2%. It pays $2.16 as dividends annually, yielding 3.2% on the current price.
The $46.08 billion consensus revenue estimate for 2023, ending Dec. 31, 2023, represents a 3.3% increase from the prior year. The $3.36 consensus EPS estimate for the next year indicates a 9.2% year-over-year rise. Furthermore, it has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock improved 9.4% in price over the past year and closed Friday's trading session at $43.32.
GSK's POWR Ratings reflect a strong outlook. The stock has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
GSK has a B grade for Stability, Value, and Growth. It is ranked #8 of 167 stocks in the Medical - Pharmaceuticals industry. Click here to see GSK's POWR Ratings for Momentum, Sentiment, and Quality.
Click here to checkout our Healthcare Sector Report for 2022
GILD shares were trading at $62.33 per share on Monday afternoon, down $0.04 (-0.06%). Year-to-date, GILD has declined -13.06%, versus a -14.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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