Investors seeking a steadily growing passive income stream want to turn their heads toward the healthcare sector. Unlike with enterprise software sales or consumer goods, spending on healthcare tends to move in a positive direction regardless of what's happening to the overall economy.
In 2023, the national health expenditure grew 7.5% to $4.9 trillion. With strong positions in the pharmaceutical and medical technology industries, AbbVie (ABBV 2.88%), Johnson & Johnson (JNJ 0.44%), and Medtronic (MDT +0.66%) are riding this steadily upward trend.
All three of these stocks offer dividend yields that are more than twice what you'd receive from the average stock in the S&P 500 index. They also have decades-long dividend-raising streaks under their belts, and the means to raise their payouts further in the years ahead.
1. AbbVie
AbbVie was the biopharmaceutical division of Abbott Laboratories until it spun off in 2013. AbbVie has maintained Abbott's decades-long dividend-raising streak and raised the bar for its industry. The company's increased its payout by a whopping 310% since 2013. At recent prices, it offers a 3.8% yield.
NYSE: ABBV
Key Data Points
AbbVie's dividend growth has subsided in recent years because of the loss of patent-protected market exclusivity for its former lead product, Humira. Sales of the popular injection used for treating arthritis, psoriasis, and other autoimmune disorders fell 36.5% year over year during the first nine months of 2024.
But a pair of treatments that launched in 2019 are already offsetting Humira's losses. Combined sales of Skyrizi, a psoriasis treatment, and Rinvoq, for arthritis, soared to an annualized $19.3 billion in the third quarter.
Skyrizi and Rinvoq aren't the only recently launched drugs in AbbVie's product lineup with rising sales. Elahere, an ovarian cancer treatment AbbVie acquired last year, added $139 million to the company's top line and could top out at around $2 billion annually.
Now that the worst losses from Humira are in the rearview mirror, management predicts annual sales growth at a high-single-digit percentage through 2029.
2. Johnson & Johnson
Johnson & Johnson no longer sells the iconic consumer goods that it's famous for. These days, it's a leaner business focused on medical technology and pharmaceutical products.
NYSE: JNJ
Key Data Points
J&J hasn't raised its payout as quickly as AbbVie, but it is up by a respectable 77% over the past decade. At recent prices, it offers a 3.4% yield. It also offers investors heaps of confidence that comes with an annual dividend-raising streak that's been running for 62 years.
Folks holding J&J shares can look forward to continued dividend growth on the back of a new lung cancer treatment. Last August, the Food and Drug Administration approved Lazcluze in combination with Rybrevant for the first-line treatment of a genetically defined population of lung cancer patients.
We recently learned that a combination of Rybrevant plus Lazcluze beat the pants off the current standard of care, Tagrisso from AstraZeneca, in a pivotal trial. All the data isn't in yet, but J&J expects a median overall survival improvement of more than one year.
AstraZeneca recorded Tagrisso sales that reached $5.8 billion last year. With a competitor that improves patients' odds of long-term survival, J&J's combo treatment could do even better. With Rybrevant, Lazcluze, and other recently approved treatments to push up sales, investors can look forward to many more annual dividend payout raises from this healthcare giant.
3. Medtronic
Replacement heart valves, pacemakers, insulin pumps, nerve stimulators, and surgical robots are just a handful of the devices and technology that make Medtronic a dividend investor's dream come true. At recent prices, the medical technology specialist offers a 3.2% dividend yield.
NYSE: MDT
Key Data Points
Constantly launching next-generation devices has allowed Medtronic to raise its dividend payout for 47 consecutive years. A recently announced negative development for J&J could help it continue its streak.
Last October, the FDA approved a new pulsed field and radiofrequency ablation catheter from Medtronic. As the first of its type, it could become a popular option for treating persistently irregular heartbeats, and its path forward will have less competition than anticipated. On Jan. 5, J&J halted sales and procedures with its recently approved pulsed field ablation device, named Varipulse, while it investigates four patients who experienced a stroke after receiving the device.
More recently, Medtronic received regulatory approval throughout Europe to market the world's only closed-loop deep brain stimulation device for Parkinson's disease patients.
With industry-leading positions in several areas plus a handful of new, first-in-class products to market, Medtronic's best days are still ahead. Adding some shares to a diverse portfolio and holding them over the long run is a nearly surefire way to boost your passive income stream.
