You don’t see financial TV channels dedicated to minute-by-minute coverage of dividend yield or increases, but for investors in companies like Sanofi (NASDAQ: SNY), AstraZeneca plc (NASDAQ: AZN), and Smith & Nephew plc (NYSE: SNN), there should be at least a little excitement about intrinsically boosting your stock’s return every quarter.
All three of these stocks hail from the medical sector, all are based in Europe, all have price performance better than about 80% of the broader market, and all are dividend payers.
Investors who rely on income from their investments are undoubtedly aware that dividends can account for a significant portion of their return in the short and long term. According to research by Hartford Funds, dividends historically contributed about 33% of the S&P 500’s total return since 1960.
It’s true that this figure can vary depending on the time period; for example, many companies paused or slashed their dividend in 2020 as earnings declined, or they were simply being prudent. Many of those companies have since restored their dividends or resumed increases.
Within the broad healthcare sector, about 70% of companies pay dividends. That’s mostly concentrated in the sub-industries of pharmaceuticals, medical devices, and other services, which are home to well-established, long-profitable companies. Upstarts, such as biotech stocks, frequently aren’t profitable; hence, no dividends.
Sanofi’s dividend yield is 2.25%. The company was among those decreasing its shareholder payout in 2020, but it’s been on the rise since 2021. In February, the board OK’d a dividend increase of 6.9%.
The company is well-situated for future growth, despite an expected decrease in earnings this year. The stock gapped up more than 6% in triple average volume on March 23, following encouraging news about new uses of its big-selling medication Dupixent. While Dupixent U.S. sales increased 8.7% in the fourth quarter, analysts see more growth ahead as a treatment for COPD.
In the past month, two analysts either boosted their price target on Sanofi or upgraded the stock. The consensus rating is “moderate buy,” with a price target of $60, a 7.01% upside. Sanofi next reports results on April 27, with Wall Street eyeing earnings of $1.09 per share on revenue of $10.73 billion.
The stock is on a trajectory to clear a sloppy base that began a year ago. It’s returned 18.02% in the past month. Upside volume has outpaced downside volume, indicating buyers are in charge.
A glance at MarketBeat’s earnings data for U.K.-based AstraZeneca shows the company beating earnings views for the past year.
In a February report, Bank of America gave AstraZeneca the nod as one of the best European pharmaceuticals.
“We believe a robust pipeline progression positions AZN's pipeline as best-in-class, potentially allowing premium long-term growth. We expect multiple product launches and (phase three) catalysts to drive meaningful sales growth at AZN for the first time in almost a decade,” wrote Bank of America analysts.
Analysts’ consensus rating on the stock is “hold,” with a price target of $85, an upside of 13.85%
AstraZeneca’s dividend yield is 2.59% and is paid twice yearly.
The stock’s chart shows a recent breakout from a meandering consolidation that began in January, clearing resistance above $72.12. The stock is currently in buy range, hovering about 3.7% above its buy point. Refrain from chasing this, or any stock, if it rallies 5% or more from its buy point.
Smith & Nephew
This U.K.-based midcap isn’t particularly well known by name. The company makes joint replacement systems; arthroscopy products; devices such as screws, plates, and pins to repair bone trauma; as well as wound care and other related surgical products.
Sales and earnings dropped in 2020 due to pandemic-era slowdowns in elective surgeries, but growth has since resumed. Wall Street expects another earnings decrease this year but 22% growth next year, to $1.42 per share.
In a March 8 research note, Morningstar analyst Debbie Wang said the company has benefited from the resumption of regular procedure volume, while “launches of key new products that have filled distinct gaps in the portfolio, and improved operations to address demand.”
However, Wang pointed out that headwinds remain, including foreign exchange rates and inflation.
The company’s dividend yield is 3.02%. This is another recent breakout; the stock cleared a buy point north of $29.83 on April 12, as you can see on its chart. This was a particularly constructive breakout, as the most recent consolidation undercut the previous structure low. That price action often sets the stage for even further gains, as it shakes out holders without conviction in the stock.