High-growth tech companies are not the only route to wealth. Another reliable approach is to invest in solid healthcare companies that can grow their earnings over time, with some also offering additional benefits like dividends. These healthcare stocks should not replace the high-growth stocks in your portfolio; rather, they should complement them. This combination is expected to deliver substantial returns over the long term.
The following three healthcare stocks are worth considering.
Johnson & Johnson (JNJ) made a key decision a few years ago: spinning off its consumer health business to focus on two divisions with stronger growth potential—innovative medicine and medical technology. Today, that bet is paying off. In the most recent quarter, Johnson & Johnson’s innovative medicine sales grew by 11%, and medical technology sales increased by more than 7%. Overall sales rose by nearly 10% to approximately $24 billion. This growth has been supported by 28 products or platforms generating at least $1 billion in annual revenue each, already reaching blockbuster status. This, combined with a strong focus on innovation, could help Johnson & Johnson achieve its goal of double-digit growth by the end of this decade. Additionally, investors receive a dividend of $5.36 per share, yielding 2.3%. The company’s level of free cash flow and its 64-year track record of consecutive dividend increases suggest it has the ability to maintain this growth momentum.
Vertex Pharmaceuticals (VRTX) is the world’s leading supplier of cystic fibrosis treatments, which has given it a long track record of earnings growth. Last year, the company’s revenue grew by 9% to $12 billion, with the majority attributed to its cystic fibrosis product portfolio. The latest drug in this portfolio, Alyftrek, along with the long-time blockbuster Trikafta, thanks to recent label expansions, now covers approximately 95% of the cystic fibrosis patient population in the U.S. The company continues to develop drug candidates for patients who cannot benefit from existing products. More notably, Vertex has successfully expanded into other therapeutic areas, receiving approval for Casgevy a few years ago in partnership with CRISPR Therapeutics to treat blood disorders. Last year, Vertex also gained approval for the pain drug Journavx. These approvals demonstrate the company’s ability to successfully break out of a single therapeutic area and bring additional growth potential for the future.
UnitedHealth Group (UNH) faced a setback last year due to multiple headwinds. The company underestimated medical costs and healthcare service utilization, which put pressure on its earnings. However, the company immediately recognized the problem and made significant efforts to turn things around. Today, those measures are showing results. In its recently reported quarterly results, the company raised its full-year earnings guidance to above $17.35 per share, higher than its previous forecast of approximately $17.10. Quarterly revenue grew by 2% to over $111 billion—this growth rate may not be spectacular, but the key is that it is moving in the right direction. More importantly, the company reported improvements across all its business segments. UnitedHealth attributes this performance to better pricing, operational improvements, and the use of artificial intelligence to increase efficiency. As the largest health insurer in the U.S., its insurance and service businesses have built a deep moat that competitors find difficult to challenge. As UnitedHealth takes solid steps on its path to recovery, it has the potential to create real wealth for investors over the long term.
The healthcare sector offers a reliable path to wealth accumulation beyond high-growth tech stocks. Johnson & Johnson achieves steady growth and consistent dividend payouts by focusing on innovative medicine and medical technology. Vertex Pharmaceuticals relies on its leading position in cystic fibrosis and has successfully expanded into other therapeutic areas. UnitedHealth Group, by making timely strategic adjustments, has shown signs of recovery after overcoming short-term difficulties. Each of these three companies has its own unique characteristics, all possess long-term investment value, and they can serve as solid, complementary roles in an investment portfolio.
