The healthcare sector can be a great place to look for income because medicine is considered non-cyclical due to its essential nature. Here are three dividend stocks with decent yields that investors might want to consider buying in 2024.
Pfizer
First up is biopharmaceutical giant Pfizer (NYSE: PFE). To be honest, I was surprised to see that the dividend yield stands at around 5.8%. That soars way above the average for an S&P 500 stock, which is just under 1.5%.
But on second thoughts, perhaps I shouldn’t have been surprised. After all, the company has been facing dwindling demand for its Covid vaccines and treatments.
Consequently, its share price has been cut in half over the past two years.
However, the firm has carried on paying and increasing dividends. Indeed, it has hiked its payout for 15 consecutive years now. Hence, the ultra-high yield (by US standards).
In 2024, Pfizer is guiding for sales in the range of $58.5bn-$61.5bn, which would represent about 4% year-on-year growth. Its earnings from that should easily cover the dividend.
But one potential risk is the company’s recently completed acquisition of Seagen for a total value of about $43bn.
While this turns Pfizer into a leading oncology player, it is still a sizeable price tag. It financed the sale through $31bn in new long-term debt. We’ll only know in hindsight whether it was good value or not.
Lastly, and perhaps unsurprisingly given the share price decline, the stock is dirt cheap. It’s trading at just 13 times forecast earnings for 2024.
After digging in, Pfizer shares have certainly piqued my interest from an income perspective.
GSK
Next up is GSK (LSE: GSK). The FTSE 100 stock is carrying a respectable forecast yield of 4.1% for 2024.
GSK has struggled in recent years due to litigation surrounding its discontinued heartburn Zantac drug. This is an ongoing risk.
Yet I feel this is already reflected in its bargain-basement valuation. Currently, the price-to-earnings (P/E) ratio is just 9.4. That’s incredibly low for a well-established pharma giant.
Plus, the dividend is also comfortably covered by earnings.
Medtronic
Lastly, we have Medtronic (NYSE: MDT), one of the largest medical device firms in the world.
Like Pfizer, this is another stock that has badly underperformed the market. It’s basically flat over five years against an approximate 80% gain for the S&P 500.
However, the company has a fantastic dividend track record, having increased its payment for 46 straight years.
Today, the stock is yielding 3.3%, which could prove a nice starting point if the stellar dividend run is maintained.
That isn’t guaranteed though, looking at the payout ratio. This measures how much in dividends a company has paid out relative to its net profit. Medtronic’s is currently 90%, which is very high and could become an issue if earnings come in light.
That said, the firm’s earnings have been unusually volatile since the disruption of the pandemic. The good news is that analysts see profits stabilising and free cash flow rising nicely over the next few years as normality returns to the healthcare industry.
Looking further ahead, Medtronic appears perfectly positioned to benefit as populations live longer and demand grows for joint replacements, cardiovascular devices, hearing aids, and other age-related products.
