With an upbeat third-quarter earnings season, investors have probably just started to gain some confidence in the market. Those keen on the MedTech industry were encouraged by the massive vaccine rollout and strong signs of recovery reflected by these firms’ base elective businesses. The recovery rate has been increasing as companies have started to meet the pent-up demand following months of suppressed spending. However, the sudden emergence and fast worldwide spread of the more contagious coronavirus variant and its ripple impact on the global economy are again taking a toll on investors' minds. Global markets have been rattled by concerns that the new omicron COVID-19 variant could potentially disrupt the recovery achieved through the widespread vaccine rollout so far.
In fact, the spread of the omicron variant has started to show its impact on the United States economy. Going by a BBC news article, in the United States, the Dow Jones Industrial Average and the broader S&P 500 share indexes closed 1.9% lower on Dec 1, 2021. The declines followed remarks by the Federal Reserve chair suggesting that the emergence of the new variant would instill more uncertainty around economic recovery and inflation.
In this volatile stock market, investors should ideally be focusing on high-yield dividend MedTech companies with sustainable business models and a long track of profitability. The MedTech space is expected to remain resilient, backed by the transformation of business models. Considering this, stocks like Abbott Laboratories, Inc. ABT, West Pharmaceuticals Services, Inc. WST, Baxter International, Inc. BAX and Chemed Corporation CHE seem like the right picks.
Dividend Growth Stocks: A Winning Strategy
Amid the pandemic-induced market turmoil, it is prudent to adopt a longer-term investing strategy and pick some dividend-paying growth-focused MedTech stocks which are fundamentally strong.
Dividend acts as a major source of consistent income for investors in any market though it does not offer impressive price appreciation. While several dividend stocks could provide capital appreciation, focusing on those with a history of dividend growth should lead to a healthy portfolio with greater scope for capital appreciation as opposed to simple dividend-paying stocks or those with high yields.
Additionally, these stocks have superior fundamentals that make dividend growth an excellent and promising investment for the long term. These include a sustainable business model, good track of profitability, rising cash flows, good liquidity, a strong balance sheet and some value characteristics. As a result, picking dividend growth stocks appears as a winning strategy.
4 Stocks in Focus
Here are a few MedTech companies paying consistent dividends with a Growth Style Score of B. Our research shows that stocks with a Growth Score of A or B steadily outperform the market.
Abbott, carrying a Zacks Rank #3 (Hold), reported better-than-expected earnings and revenue numbers for the third quarter of 2021. Within Diagnostics, sales increased more than 45%, led by growing demand for Abbott’s portfolio of COVID-19 tests as well as improvement in its base business. Within the Established Pharmaceuticals Division, third-quarter sales grew more than 15% year over year, led by double-digit growth in China, Russia and India, which led to overall sales growth of 18% in key emerging markets.
Abbott raised its dividend five times in the past five years, with its payout growing 12.72% over the period. ABT’s payout ratio is currently at 34% of earnings. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott Laboratories Price
Abbott Laboratories price | Abbott Laboratories Quote
West Pharmaceuticals Services, carrying a Zacks Rank #3, exited third-quarter 2021 on a strong note, wherein earnings and revenues beat the Zacks Consensus Estimate. The company continues to gain from both its segments, Proprietary Products and Contract-Manufactured Products, which have been contributing to the top line for quite some time. Backed by the strength shown in the quarter under review, West Pharmaceuticals raised its 2021 outlook, instilling further confidence. The company’s high-value products (HVP) continue to drive gross and operating margins.
West Pharmaceuticals Services has increased its dividend five times in the past five years, with its payout growing 6.66% over the period. WST’s payout ratio is currently at 9% of earnings.
West Pharmaceutical Services, Inc. Price
West Pharmaceutical Services, Inc. price | West Pharmaceutical Services, Inc. Quote
Baxter, carrying a Zacks Rank #3, ended third-quarter 2021 on a strong note, wherein earnings and revenues beat the Zacks Consensus Estimate. The company witnessed strong performance across all of its business units. Growth in the Americas, EMEA and APAC is encouraging. Baxter has witnessed tremendous demand for many products, including PrisMax and PRISMAFLEX, continuous renal replacement therapy, devices and associated consumables. The company’s MINI-BAG Plus drug delivery system, the Spectrum IQ infusion system in SAS, plus IV Solutions parenteral nutrition therapies and injectable drugs are in great demand as well.
Baxter increased its dividend five times in the past five years, with its payout growing 16.37% over the period. BAX's payout ratio is currently at 33% of earnings.
Baxter International Inc. Price
Baxter International Inc. price | Baxter International Inc. Quote
Chemed, carrying a Zacks Rank #3, ended the third quarter of 2021 on a bullish note with better-than-expected earnings and revenues. Chemed’s Roto-Rooter is currently the nation’s leading provider of plumbing, drain cleaning, and water restoration, providing services to over 90% of the U.S. population. In the third quarter, the segment surged 15.7% year over year. Chemed’s management believes Roto-Rooter is well positioned for growth post-pandemic and anticipates continued expansion of the segment’s market share banking on the company’s core competitive advantages in terms of brand awareness, customer response time and 24/7 call centers and Internet presence.
Chemed increased its dividend five times in the past five years, with its payout growing 6.87% over the period. CHE's payout ratio is currently at 7% of earnings.
Chemed Corporation Price
Chemed Corporation price | Chemed Corporation Quote
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