Investors searching for stocks to carry on to for some time might want to think about dividend-paying firms. Besides offering an everyday stream of passive income, dividend stocks have generally outperformed their non-dividend peers over the long term.
That is not surprising. Maintaining a growing dividend program through good times and bad requires a rock-solid business. Healthcare firms have an added advantage since they’re in a defensive industry that performs comparatively higher when the economy slows down.
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With that backdrop, let’s consider two healthcare dividend stocks for investors focused on the long game: Merck(NYSE: MRK) and Medtronic(NYSE: MDT).
The market’s forward-looking nature explains why Merck’s shares are down by 10% this 12 months. Investors are already focusing ahead to 2028, when the corporate’s biggest moneymaker by far, the cancer drug Keytruda, will lose patent exclusivity within the U.S.
And even before that, Keytruda could face competition from an investigational therapy called ivonescimab that’s being developed to treat non-small cell lung cancer, amongst other diseases for which Keytruda has earned indications. Is there any way for Merck to get out of this bind?
Yes, there may be. First, the corporate has been working on a subcutaneous version of its crown jewel that ought to earn most of the same indications as the unique and extend its patent life. Ivonescimab’s challenge could be real, but the medication won’t earn approval within the U.S. for not less than a few years or so.
Moreover, Merck is being proactive, as shown by its recent partnership with privately held China-based LaNova Medicines to develop LM-299, a bispecific antibody in the identical class of medicines as ivonescimab.
Something might come out of Merck’s partnership with LaNova, or possibly it is going to be a bust. The vital point is that Merck, a longtime leader in oncology, will seek to search out ways to get around this latest challenge.
The corporate’s success may also rely upon products in other fields. That features the newly approved Winrevair, a therapy for pulmonary arterial hypertension; Merck’s vaccine business; its animal health unit, and more.
Its pipeline features greater than 60 programs in phase 2 studies and greater than 30 in phase 3 clinical trials. The corporate hasn’t maintained its leadership within the pharmaceutical industry for many years by accident. Expect it to do the identical for for much longer.
Meanwhile, its financial results remain solid. Third-quarter revenue grew by an honest 4% 12 months over 12 months to $16.7 billion. The corporate’s adjusted earnings per share of $1.57 were down 26% in comparison with the year-ago period, but that was due to acquisition-related expenses. It’s nothing to fret about for investors.
Meanwhile, the dividend has increased by 80% previously decade, and the corporate’s forward yield tops 3.18%, in comparison with the S&P 500‘s average of 1.32%. Despite its poor stock market performance this 12 months, Merck can overcome its challenges and proceed rewarding shareholders with payout increases.
Medtronic, a medical device specialist, has struggled a bit previously few years. Besides the pandemic severely disrupting its business, the corporate also handled slow revenue growth.
The corporate had plans to shed a few of its low-growth units, nevertheless it eventually went back on that call (even though it did exit the unprofitable ventilator business). Still, the stock is value buying for long-term dividend investors for 3 reasons: Its solid position in its market, several exciting growth opportunities, and an incredible dividend track record.
To the primary point, Medtronic is one in all the most important medical device firms on this planet. Its portfolio has dozens of products, it routinely earns latest approvals and indications, and it operates in over 150 countries. Medtronic has successfully navigated the healthcare industry for many years. That is not any small feat in and of itself.
Secondly, the corporate is taking a look at some exciting opportunities. One among them is its diabetes care segment, which has been its biggest growth driver for a while. Within the second quarter of its fiscal 2025, ended Oct. 25, revenue increased by 5.3% 12 months over 12 months to $8.4 billion. That is pretty good. Nevertheless, the corporate’s diabetes care unit increased sales even faster, reporting revenue of $686 million, or 12.4% higher than the year-ago period.
One among the business’ most vital products on this segment is its revolutionary MiniMed 780G insulin pump. Given the big addressable market in diabetes — which affects greater than a half-billion adults worldwide — there may be more work to be done here for Medtronic.
The corporate can also be developing a robotic-assisted surgery (RAS) system, called Hugo, which is undergoing clinical trials within the U.S. The RAS market is severely underpenetrated. As Medtronic identified last 12 months, lower than 5% of procedures that could be performed robotically currently are. It might be one other vital long-term opportunity for the corporate.
And the third reason to make Medtronic a long-term holding: It has increased its dividend for 47 consecutive years and offers a forward yield of three.20%. The corporate could turn into a Dividend King pretty soon and maintain its payouts for a few years thereafter. That makes it a top income stock to purchase and hold for good.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Merck. The Motley Idiot recommends Medtronic and recommends the next options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Idiot has a disclosure policy.