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2 Dividend Opportunities in Healthcare

Check out these pharmaceutical stocks for both capital appreciation and dividend yield.

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Damien Conover: When thinking about investing and thinking about dividends, one area we like to look at is the pharmaceutical stocks. These stocks tend to pay out a lot of their cash flows in dividends. And for the most part, dividends in the pharmaceutical landscape are fairly safe. Two names that we're highlighting today are AbbVie and Pfizer. Let's take them one at a time.

With AbbVie, this is a stock right now that's paying out a dividend yield that's almost over 6%. So very strong dividend yield and the valuation does look attractive. Now, the reason why there are some concerns about the stock is in about three to four years, they're going to lose patent exclusivity on one of their key molecules, called Humira. But the reason why we like to stock is they've got a great pipeline, and they've made a recent acquisition of Allergan to get even more products. So, you're looking at a much more diversified company. And even in the worst case, that dividend payout ratio only gets to about 65%. So, we think there's plenty of cash flows in the overall landscape for AbbVie to be able to pay out its dividend over the next several years.

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.