It is time to consider investing in health-care stocks again, according to Wolfe Research. The sector has experienced a significant pullback of over 4% from September to October, making it one of the worst-performing sectors in the past month, as noted by technical analyst Rob Ginsberg in a recent report. The Health Care Select Sector SPDR Fund (XLV) has bounced back above its 50-day moving average during this relief rally, indicating a potential reacceleration towards its previous highs. With the sector not yet overbought, there appears to be further upside potential for health-care stocks. Additionally, many health care stocks offer attractive dividend payouts, further adding to their appeal.
For investors looking to capitalize on this opportunity, CNBC Pro has identified S&P 500 health-care sector stocks with a dividend yield of 1.5% or higher, exceeding the S&P 500 average yield. At least 51% of Wall Street analysts covering each stock have rated them as a buy, according to FactSet data.
One such stock is Abbott Laboratories, which offers a dividend yield of 1.9%. The company manufactures and sells pharmaceutical, diagnostic, and nutritional products, as well as medical devices. Approximately 55% of analysts covering Abbott Laboratories rate it as a buy, with an 11% upside potential to the average price target, according to FactSet. Abbott recently reported earnings and revenue that surpassed expectations for the third quarter and raised its full-year earnings-per-share guidance. CEO Robert Ford expressed confidence in the company’s performance and outlook, pointing to strong momentum heading into the next year.
Becton, Dickinson and Company, a global medical technology company, provides investors with a 1.6% dividend yield. Around 60% of analysts rate the stock as a buy, with nearly 16% upside to the average price target. Health insurer Cigna also offers a 1.6% dividend yield and has nearly 13% upside potential to the average analyst price target. Cigna has seen positive earnings and revenue results in recent quarters, with its Express Scripts division attracting attention amid legal disputes over drug pricing practices.
Merck & Co. is another attractive option for investors, with a dividend yield of 2.8% and nearly 26% upside to analysts’ consensus price target. The global health-care company focuses on prescription medicines, vaccines, and biologic therapies. Merck recently announced positive results for its experimental treatment for the respiratory syncytial virus (RSV) in infants, and its second-quarter earnings exceeded analyst estimates. The company will report its third-quarter results on October 31.
In conclusion, the health-care sector presents compelling investment opportunities, with several stocks offering attractive dividend yields and potential upside. Investors may consider allocating funds to well-established companies like Abbott Laboratories, Becton, Dickinson and Company, Cigna, and Merck & Co., which have demonstrated strong performance and growth prospects in the current market environment.