When it comes to dividend performers, healthcare usually takes a backseat to options like REITs and energy stocks. However, the sector’s resilience, driven by aging populations and consistent demand for medical services, makes it an underrated source of steady income. Some healthcare companies not only offer impressive yields but also boast strong financials and long-term growth potential.
Looking to add healthcare exposure to your portfolio with a bonus? These three healthcare industry stocks feature dividend yield values of at least 6%—a major boost from the industry’s 1.55% average dividend yield. Of course, it’s crucial to take a look at more than just dividends when deciding which companies have a long-term place in your portfolio. Let’s examine each of these major dividend players and decide if they’re undervalued… or just overpaying.
Organon & Co. Maintains Price Target, Dividends Despite Analyst Hesitancy
Innovative healthcare research firms rarely offer a dividend; instead, they choose to reinvest profits back into research and development. Organon & Co. (NYSE: OGN) bucks this trend, offering a 6.84% dividend yield supported by a 25.99% three-year annualized growth rate. It pays out a competitive 22.63% of its cash flow as dividends and holds a price target of $21.33—a 45.12% potential upside combined with consistent cash flow.
Before being lured in by this massive dividend yield, it’s important to consider stock indicators that could signal that these payouts aren’t here to last. While short interest for Organon & Co. dropped by a little more than 9% last month, it still maintains a total short interest of 16.58 million shares, representing 6.46% of the float. Analysts maintain a Hold rating for OGN, which comes in light of a steadily declining price prediction trend that began in 2021.
Falling Short Interest (and Dividends) Could Make Walgreens a Winner
The Walgreens Boots Alliance (NASDAQ: WBA) has had a few rough years. Declining foot traffic in its physical retail stores remains an issue that has never truly recovered post-pandemic. Walgreens announced in 2024 that it would shut down 1,200 additional underperforming locations, extending its store closure trend. Despite its current 10.23% dividend yield, the stock has seen a 19.12% reduction in annualized dividend growth over the past three years.
Regardless of these sustainability cuts, Walgreens’ $1.00 annual dividend could be a solid value stock in light of recent falling short interest and low pricing. Short interest fell by 13.58% recently, indicating a sharp increase in investor confidence. It also beat its most recent consensus EPS estimate by more than 34%. This continues a trend of rising revenue that began in early 2024.
As the stock trades near a 52-week low, now could be the time to capitalize on this healthcare retailer. However, don’t be surprised if another dividend cut is on the horizon.
Analysts Hold Their Breath on Spok Holdings
Spok Holdings, Inc. (NASDAQ: SPOK) offers international healthcare technology exposure alongside a dividend yield of 7.48%. It brings investors a consistent three-year dividend growth rate of 35.72%, which can be appealing in an inflationary environment.
From a sustainability perspective, things aren’t looking great for Spok. It maintains a miserable dividend payout ratio of 171.23%—more than double the 75% threshold commonly used to indicate a dividend trap. If you decide to invest in Spok Holdings, expect that a dividend cut will likely come in the near future.
Analyst opinions on Spok are split. It maintains a single Hold rating with a consensus price target of $15.00. This represents an 8.59% potential downside, but there are a few positive indicators you might want to consider. Spok Holdings’ short interest fell by 6.56% in the last month, with just 1.59% of shares shorted. Despite this, Spok maintains a risky play that should be approached with caution.
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