Pfizer is getting back on its feet after a difficult post-pandemic stretch.
Bristol Myers Squibb faces a patent cliff that management is well equipped to navigate.
UnitedHealth Group continues to grow despite a laundry list of problems that would sink many other companies.
The market has not been kind to healthcare stocks during the past couple of years. Patent cliffs, politics, and soaring medical costs have weighed on investors' minds, as well as the share prices of several prominent industry stalwarts.
But is healthcare realistically an industry in decline? Probably not. It is one of the largest and most critical industries in the U.S., with total healthcare spending totaling nearly $15,000 per capita. That's the highest among the world's developed countries.
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This means that some excellent dividend-paying healthcare stocks could be trading at bargain prices that investors may want to jump on before the end of October.
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Pharmaceutical maker Pfizer (NYSE: PFE) enjoyed a huge windfall from the COVID-19 vaccine. But it has become a value stock during the past several years.
Vaccine sales dried up, sending the company's top and bottom lines reeling. Today, Pfizer trades at just over 9 times this year's earnings estimates, and the stock yields a hefty 6%.
High yields are typically risky. Fortunately, this dividend seems sustainable. Although it consumes nearly 90% of the company's cash profits right now, management continues to affirm its commitment to maintaining the payout. It also has $11.7 billion in cash and short-term investments to plug any near-term gaps.
Eventually, Pfizer will need to grow to give that dividend some breathing room. It has an ambitious pipeline with 95 candidates in total, including 31 in phase 3 clinical trials.
Analysts estimate that the company's earnings will increase by an average of 5% annually during the next three to five years. That should sustain the dividend -- and perhaps even eke out more increases.
Pfizer isn't the only pharma maker that's struggling. Bristol Myers Squibb (NYSE: BMY) has had a rough go, although for different reasons.
The company's main problem is a steep patent cliff, with Eliquis and Opdivo losing U.S. exclusivity in 2028. These drugs accounted for roughly half of all sales last year, so that's a powerful looming headwind for growth.
The company has a robust portfolio of fast-growing drugs, as well as promising developmental candidates, so there's a strong chance the business will be fine as older drugs fade and hand off the baton to these up-and-coming therapies. Still, the concerns have weighed on the stock.
Bristol Myers Squibb trades at only 9 times this year's earnings estimates and yields 4%. The dividend is still just 44% of the company's cash profits, so unless management falls drastically short of filling that revenue hole in 2028, the stock looks like a strong income producer at a compelling price.
Health insurance and services provider UnitedHealth Group (NYSE: UNH) is a central cog in U.S. healthcare. The company has also been a political lightning rod, which only intensified after the slaying of one of its executives in 2024, as well as lawsuits and investigations regarding its business practices.
If that weren't enough, surging Medicare costs have squeezed margins. Yep, it's been a tough stretch for the stock.
But after a prolonged slump, it has rallied throughout 2026. Even after its run, the shares still trade at only 19 times 2026 earnings estimates and yield 2.5%. That payout is much higher than the stock's historical norms. That's often a warning sign, but the company's cash profits still easily cover the dividend.
It's difficult to slow the U.S. healthcare machine. UnitedHealth continues to prove that it's a very resilient company, and now things are looking up once again.
Analysts see UnitedHealth Group's earnings increasing by more than 13% annually during the next three to five years. That growth makes the stock a no-brainer at its current price.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb and Pfizer. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.