The stock market started the month in green with two rip-roaring rallies, but the momentum could not last. The Nasdaq composite closed at its two-year low on Monday. The market is experiencing a broad sell-off amid macroeconomic issues. According to JPMorgan CEO Jamie Dimon, the S&P 500 could fall another 20% depending on whether the Fed attains a soft or a hard landing.
“This is an awful stock market environment that is grappling with a weakening economy, uncertainty over earnings and how long the Fed’s tightening will last, and sentiment issues with an extremely risk averse investor psychology,” said David Bahnsen, a chief investment officer of The Bahnsen Group.
However, on the other hand, the healthcare sector has been thriving since the onset of the pandemic as companies rushed to develop vaccines and garnered massive returns. Moreover, this sector should continue to see a raging demand due to the rise in global chronic diseases and increased health awareness among the masses. The global pharmaceuticals market is expected to reach $2.14 trillion by 2026, expanding at a 7.7% CAGR.
Healthcare stocks are considered safe havens amid market downturns. Thus, we think Johnson & Johnson (JNJ) and Pfizer Inc. (PFE), which has a significant dividend-paying history, could be solid additions to your retirement portfolio.
Johnson & Johnson (JNJ)
JNJ is engaged in the research and development, manufacture, and sale of a range of products in the healthcare field globally. It operates through three segments Consumer; Pharmaceutical; and MedTech.
On September 20, JNJ announced the opening of the San Francisco Bay Campus, a cutting-edge Research and Development (R&D) center in the Bay Area. This should help the company expand its presence in the area and deliver transformative healthcare solutions.
The company’s Board of Directors authorized a $5 billion repurchase of its common stock in the same month. “With our strong cash flow and the lowest level of net debt in five years, we have the ability to invest in innovation, grow our dividend, execute strategic acquisitions, and take this action to deliver shareholder returns and drive long-term growth,” said Joaquin Duato, Chief Executive Officer.
This demonstrates the company’s confidence in its business prospects and should enhance its shareholder value.
The company’s $4.52 annual dividend yields 2.82% at its current share price. It paid its last quarterly dividend of $1.13 on September 6, 2022. Its dividend payouts have increased at a 5.8% CAGR over the past three years and a 6% CAGR over the past five years. The company has a record of 59 consecutive years of dividend growth.
During the second quarter ended June 30, 2022, JNJ’s reported sales increased 3% year-over-year to $24.02 billion. The company’s adjusted net earnings grew 4.3% from the year-ago value to $6.91 billion, while its adjusted EPS grew 4.4% from the prior-year quarter to $2.59.
Street expects JNJ’s revenues and EPS to rise 1.8% and 2.8% year-over-year to $95.43 billion and $10.07, respectively, in fiscal 2022. It also beat the consensus EPS estimates in each of the trailing four quarters.
The stock has gained marginally intraday to close the last trading session at $160.41.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
JNJ also has an A grade in Stability and a B in Quality, Growth, and Value. It is ranked #2 of 163 stocks in the Medical – Pharmaceuticals industry.
Beyond what is stated above, we’ve also rated JNJ for Sentiment and Momentum. Get all JNJ ratings here.
Pfizer Inc. (PFE)
PFE discovers, develops, manufactures, distributes, and sells biopharmaceutical products worldwide. It offers medicines and vaccines in various therapeutic areas. The company serves wholesalers, retailers, hospitals, clinics, government agencies, as well as disease control and prevention centers.
On October 5, PFE announced the completion of its acquisition of Global Blood Therapeutics, Inc. (GBT), a biopharmaceutical company involved in the discovery, development, and delivery of life-changing treatments for patients with sickle cell disease (SCD). This acquisition reinforces PFE’s commitment to SCD and gives the potential to address critical needs.
In the same month, PFE acquired Biohaven Pharmaceutical Holding Company Ltd. (BHVN), the maker of NURTEC® ODT (rimegepant), an innovative migraine therapy approved for both acute treatment and prevention of episodic migraine in adults. This should expand the company’s calcitonin gene-related peptide portfolio and better serve the needs of migraine patients worldwide.
The company’s $1.60 annual dividend yields 3.83% at its current share price. Its quarterly dividend of $0.40 is payable on December 5, 2022. Its dividend payouts have increased at a 5.7% CAGR over the past three years and a 5.9% CAGR over the past five years. The company has a record of 11 consecutive years of dividend growth.
PFE’s revenue increased 46.8% year-over-year to $27.74 billion in the second quarter ended July 3. Its income from continuing operations grew 69.6% from the year-ago value to $9.88 billion, while its adjusted income improved 93.5% year-over-year to $11.66 billion. The company’s adjusted earnings per common share increased 92.5% from its year-ago value to $2.04.
The consensus EPS estimate of $1.36 for the fiscal quarter ending December 2022 indicates a 26.3% improvement year-over-year. Analysts expect its revenue to rise 4.6% year-over-year to $24.93 billion for the same quarter.
The stock declined 1.4% intraday to close the last trading session at $41.75.
It’s no surprise that PFE has an overall A rating which translates to Strong Buy in our POWR Ratings system. PFE is also rated an A in Value and a B in Quality. In the same industry, it is ranked #13.
Click here to access additional POWR Ratings for Growth, Momentum, Sentiment, and Stability for PFE.
JNJ shares were trading at $163.71 per share on Tuesday afternoon, up $3.30 (+2.06%). Year-to-date, JNJ has declined -2.42%, versus a -22.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
2 Stocks That Could Help You Fund Your Retirement StockNews.com
