You have plenty of alternatives if you’re looking for a solid dividend stock in the healthcare sector. Investors have liked the nice yields paid by big pharma and medical-device stocks for years. But which healthcare dividend stocks have performed the best overall so far this century?
“Best” might mean different things to different people. We could only look at dividends paid over the past 16 years. However, that might present a skewed picture if the underlying stock performed poorly. Instead, the best approach is to look at stocks that have consistently paid dividends every year since 2001 and have the greatest total return (including stock appreciation and dividends).
Using this definition, three perhaps surprising names rise to the top. Here’s why West Pharmaceutical Services (NYSE:WST), Aetna (NYSE:AET), and Novo Nordisk (NYSE:NVO) claim the distinction of being the best healthcare dividend stocks of the 21st century — at least so far.
West Pharmaceutical Services
West Pharmaceutical Services manufactures packaging components and delivery systems for injectable drugs and healthcare products. The company has been in business since 1923. West’s customers include many of the world’s largest biotech, generic-drug, pharmaceutical, diagnostic, and medical-device companies.
Although West Pharmaceutical Services isn’t a Dividend Aristocrat, it’s not far from meeting one requirement for making the list: The company has increased its dividend for the last 24 consecutive years. However, West isn’t a member of the S&P 500 right now, so even one more year of raising its dividend won’t be enough to make the list of Dividend Aristocrats. Also, those hikes don’t necessarily mean that West’s dividend is very attractive to investors. Its yield currently stands at only 0.54%.
But what West Pharmaceutical Services lacks in dividends, it has more than made up for in share-price appreciation. West’s total return since 2001 is a staggering 1,980%. That makes West Pharmaceutical Services the best healthcare dividend stock so far this century in total return.
Aetna is one of the largest health insurers in the U.S. The company’s roots extend back to 1853, when it sold life insurance. Aetna now provides health insurance and other coverage to around 47 million Americans.
Unlike West Pharmaceutical Services, Aetna doesn’t have a great track record of dividend increases. The company didn’t raise its dividend at all in 2016 and paid the same amount in yearly dividends from 2001 through 2010. However, Aetna doubled its dividend in 2017. The dividend currently yields 1.32%. While that’s not an exceptionally high yield, it’s enough to rank Aetna as one of the top dividend stocks among health insurers.
Investors who have owned Aetna since the turn of the 21st century probably haven’t been too concerned about the lack of dividend increases, though. The total return of Aetna stock since 2001 is 1,540%.
Novo Nordisk is a Denmark-based pharmaceutical company that is a leader in the global diabetes market. The company was formed in 1989 by the combination of two Danish drugmakers, Nordisk Gentofte and Novo Industri, both of which were founded in the 1920s.
The company has increased its dividend for 20 consecutive years. Since 2010, Novo Nordisk’s dividend has almost quadrupled. Its yield now stands at 2.56%. With the drugmaker using less than half of its earnings to fund the dividend program, more dividend hikes could be in store.
Novo Nordisk’s dividend is appealing. However, the stock’s performance looks even better. Since 2001, Novo Nordisk stock has generated a total return of 1,500%.