2 recession-proof healthcare stocks to buy for 2021
As 2020 draws to a close, it’s time for investors to start thinking about the year ahead. Sadly, with the coronavirus pandemic still a big deal for the United States and the world, there is still a lot of uncertainty ahead. There is no guarantee that the economy will emerge from its slump next year; in fact, we could be due to a long, deep recession.
To combat this possibility, investors may want to look to a few healthcare stocks that should be solid investments to hold on to during a recession. Both Johnson & johnson (NYSE: JNJ) and Becton, Dickinson (NYSE: BDX) are long-term purchases that can protect your wallet during an economic downturn. Here’s why they’re particularly great choices if you’re worried things won’t get much better next year.
1. Johnson & Johnson
While Johnson & Johnson continues to face its fair share of legal issues, with lawsuits related to opioids, baby powder, etc., this is still, by and large, a mark of trust and well. known around the world which continues to generate strong sales figures.
From $ 74.3 billion in sales in 2014, the New Jersey-based company’s revenue grew to $ 82.1 billion in 2019, with a compound annual growth rate (CAGR) of 2% on average during these years. Even more impressive, in all but one of those years, his profit margin has been 18% or better.
Even in 2020, a disastrous year due to the coronavirus pandemic, the company continues to deliver consistent results. In the first nine months of the year, Johnson & Johnson’s product sales of $ 60.1 billion were only 2% lower compared to the same period last year. This is in large part thanks to its diversified professions, which help the company to adapt to changing situations. A year ago, medical devices accounted for more than 31% of the company’s sales. However, in 2020, as hospitals postpone procedures, sales of medical devices fell by more than 15% and this segment now only accounts for 16% of Johnson & Johnson’s revenue.
That’s okay, because the company also makes pharmaceuticals, and sales of these are increasing as people stock up during the coronavirus. This year, pharmaceutical sales represent 35% of Johnson & Johnson’s total sales – last year it was just 18% – and they have grown by more than 5% so far in 2020.
Johnson & Johnson is also involved in the coronavirus vaccine race; its potential vaccine is currently in Phase 3 trials. This is further proof of the versatility and adaptability so crucial in helping the company weather tough economic conditions.
Finally, another good reason to buy shares of Johnson & Johnson is that the stock’s dividend yield is 2.8%, well above average. S&P 500 stock, which normally earns around 2%. Indeed, the company is a King of dividends, having increased his payments for more than 50 consecutive years.
2. Becton, Dickinson
Another solid based in New Jersey health care stock to put in your wallet for next year, Becton, Dickinson has grown sales over the years at an even greater rate than Johnson & Johnson. For fiscal 2019, the company reported sales of $ 17.3 billion, more than double the fiscal 2014’s $ 8.4 billion. This is on average a CAGR more by 15%. Becton, Dickinson’s profit margin, however, has been a bit more modest during this period, hitting less than 10% in each of the past five years.
In fourth quarter results released on Nov. 5, quarterly sales totaled $ 4.8 billion, up 4.4%. Although revenues from its medical and interventional segments were down 4.9% and 3.4% respectively, the life sciences division grew at a rate of over 31%. Much of this was due to diagnostics, whose revenue of $ 807 million was double that of last year.
In the results release, the company pointed out that its COVID-19 testing platforms, including BD Veritor and BD Max, were key to its strong fourth quarter sales figures. Becton, Dickinson estimates that by March of next year, he will be able to produce 12 million SARS-CoV-2 antigen tests each month, up from 8 million currently.
As with Johnson & Johnson, Becton’s recurring theme, Dickinson is diversification. By having a wide range of divisions that can generate sales growth for the company, the company is able to adapt to different economic conditions. While medical delivery revenue may be down this year, testing is up. And once concerns about the coronavirus pandemic begin to ease and things return to normal, the reverse may be true.
This stability makes its dividend attractive. Today, Becton, Dickinson pays investors a quarterly dividend of $ 0.79, which gives a modest 1.3% per annum. The company has increased its dividend payments for 48 consecutive years, and two more rate hikes would place it in the Dividend King category.
Both stocks are good buys if you’re worried about a long recession
During the last recession (highlighted in gray on the chart below), these two stocks outperformed the S&P 500:
There is little reason to believe that much would change during another recession. During the crash at the start of the year, both stocks suffered smaller losses than the index:
If you’re looking for a solid, long-term investment to hang on to during a recession, either of these stocks could be a great option to put in your portfolio today. If you are looking to maximize your dividend income, Johnson & Johnson and their higher payout may be more suitable. But if you’re concerned about the legal headaches of this business, then Becton, Dickinson might be the most attractive healthcare investment for your risk profile.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.