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Top 3 Healthcare Stocks for Exceptional Growth and Reliable Dividends in 2024

Hannah Perry | October 24, 2024

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3 Top Healthcare Stocks to Buy for Growth and Dividends

The healthcare sector has become a focal point for investors in 2024, offering an appealing mix of innovation-driven growth and reliable dividend income. In the past year, top-performing healthcare stocks in the S&P 500 Index ($SPX) have achieved remarkable gains, with DaVita Inc. (DVA) leading with a stunning 106% gain, followed closely by Intuitive Surgical (ISRG) at 88% and Universal Health Services (UHS) at 87%. The developments in the sector have garnered attention from major investment firms, with Bernstein initiating coverage on several key players in healthcare. The firm has given “outperform” ratings to notable innovators such as Eli Lilly (LLY), Gilead Sciences (GILD), and Amgen (AMGN), recognizing their significant growth potential through the end of the decade. These dividend-paying stocks are prime picks for investors looking for both capital appreciation and consistent passive income.

1. Eli Lilly and Company (LLY)

Eli Lilly and Company (LLY) is a global leader in pharmaceuticals, renowned for its strong focus on research and development across various therapeutic areas, including oncology, diabetes, and neuroscience. The company has consistently outperformed in the market, with shares rising by an impressive 56.6% over the past year. Currently valued at approximately $864 billion, LLY carries a forward price-to-earnings (P/E) ratio of 67.98, significantly higher than the industry average of 21.16, indicating premium valuation with high growth expectations.

During Q2 2024, Eli Lilly reported phenomenal financial results with $11.3 billion in revenue, marking a 36% increase from the previous year, primarily driven by the strong sales of its blockbuster GLP-1 drugs, Mounjaro and Zepbound. Earnings per share (EPS) climbed 86% year-over-year to reach $3.92. Following these results, the company revised its full-year revenue forecast upwards by $3 billion and adjusted its EPS prediction to a range between $16.10 and $16.60.

In a bid to enhance its production capabilities, Eli Lilly has announced a substantial investment of $4.5 billion in its Lilly Medicine Foundry in Indiana, along with $1 billion in expansion initiatives in Ireland. The stock offers a quarterly dividend of $1.30 per share, yielding 0.57%, and has a consistent ten-year history of dividend increases. Analysts display high confidence in Eli Lilly’s future prospects, with a strong consensus rating including 20 “strong buy” recommendations out of 23 analysts. The average target price of $1,021.79 suggests a rise of about 13% from its current price.

2. Gilead Sciences, Inc. (GILD)

Gilead Sciences (GILD) is a key player in biotechnology, focusing on developing innovative treatments for serious diseases, particularly antiviral drugs for HIV, hepatitis B and C, and other viral infections. Over the past year, Gilead’s stock has risen by 12.5%, with a market capitalization of approximately $109.8 billion and a price-to-earnings ratio of 23.26, slightly above the industry average.

For income-driven investors, Gilead offers a quarterly dividend of $0.77 per share, yielding 3.49%, and has increased its dividends for the past nine consecutive years. In its Q2 2024 report, the company announced a 5% increase in total revenue to $7.0 billion compared to the same period in the previous year. Non-GAAP diluted EPS climbed to $2.01, underpinned by reduced operating expenses and enhanced revenues. For the full fiscal year, Gilead expects products sales between $27.1 billion and $27.5 billion.

Gilead recently executed strategic partnerships aimed at improving access to innovative HIV treatments through licensing agreements with six pharmaceutical manufacturers to produce generic versions of lenacapavir. Analysts generally have a positive outlook for Gilead Sciences, with a “moderate buy” consensus, including 15 “strong buy” recommendations out of 27 analysts. The average target price stands at $87.48, aligning well with current trading levels.

3. Amgen Inc. (AMGN)

Amgen Inc. (AMGN) is a notable biotechnology company dedicated to developing new treatments for serious illnesses via robust research initiatives, acquisitions, and global expansion. Over the past 52 weeks, AMGN stock has gained 15.3% and currently has a market capitalization of about $171.5 billion. With a forward P/E ratio of 16.38, the stock appears undervalued relative to its peers in the healthcare sector.

Amgen maintains an appealing quarterly dividend of $2.25 per share, yielding 2.82%, supported by a payout ratio of 43.40% and a commendable 13-year record of consecutive dividend increases. The company reported strong financial results in Q2 2024, boasting a 20% increase in total revenue to $8.4 billion year-over-year. While GAAP EPS declined to $1.38 due to increased operating expenses, non-GAAP EPS reached $4.97.

Recent announcements from Amgen include gaining FDA approval for TEPEZZA in Japan to treat Thyroid Eye Disease and receiving FDA clearance for BLINCYTO for specific types of acute lymphoblastic leukemia, further bolstering its oncology offerings. Analyst sentiment towards Amgen is cautiously optimistic, with a “moderate buy” consensus rating where 12 analysts recommend a “strong buy” while others advocate for “hold” positions. The mean target price is set at $334.88, suggesting a potential upside of roughly 6.3% from the current levels.

In conclusion, Eli Lilly, Gilead Sciences, and Amgen represent compelling choices for investors seeking a synthesis of growth and dividends in the healthcare sector. With robust market performance, innovative product pipelines, and strategic initiatives, these stocks offer potential for both short-term gains and long-term stability, making them worthy candidates for any diversified investment portfolio.