The U.S. healthcare sector is attractive for long-term investors because the industry is set to benefit from a major growth tailwind—the aging population.
The U.S. is an aging country with a very large 65+ population. This means demand for healthcare is only set to grow going forward at a rate above GDP growth.
For investors, the opportunity is the many blue-chip stocks in healthcare that will provide shareholders with long-term growth and dividends.
These 3 healthcare stocks are undervalued with strong dividend yields, which could lead to outsized returns in the years ahead.
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Undervalued Healthcare Dividend Stocks
Pfizer Inc. (PFE)
Pfizer Inc. is a global pharmaceutical company focusing on prescription drugs and vaccines. Pfizer’s CEO completed a series of transactions that significantly altered the company’s structure and strategy. It is our first choice for an undervalued healthcare stock.
Pfizer’s top products are Eliquis, Prevnar family, Paxlovid, Comirnaty, Vyndaqel family, Ibrance, and Xtandi. Pfizer had revenue of $63.6B in 2024.
The company recently reported fourth-quarter operating results. Revenue increased 21% operationally, while adjusted earnings-per-share increased to $0.63 for the quarter. Revenue growth came from the existing portfolio, while lower expenses boosted EPS.
Global Biopharmaceuticals sales gained 22% led by gains in Primary Care (+27%), Specialty Care (+12%), and Oncology (+27%). Other top-performing products include Eliquis (+14%), Vyndaqel/ Vyndamax (+61%), and Xtandi (+24). New launches, Octagam, Padcev, Adcetris, Tukysa, and Tivdak are growing rapidly.
Pfizer’s current product line is expected to produce top-line and bottom-line growth out to 2030 because of significant R&D and acquisitions. As a result, Pfizer’s current product line is growing. Previously declining volumes and sales of Paxlovid and Comirnaty have largely stabilized.
Future growth will come from increasing sales for approved indications, extensions, R&D, bolt-on acquisitions, and margin expansion. Pfizer has a strong pipeline in oncology, inflammation & immunology, internal medicine, and vaccines.
Pfizer is one of the largest pharmaceutical companies in the world. As such, it has scale in R&D, manufacturing, regulatory affairs, distribution, and marketing worldwide. This gives Pfizer the ability to bring new therapies to market, partner with smaller companies, or acquire entire companies outright. The current pipeline is robust; some will likely be blockbuster drugs even after attrition.
PFE currently yields 6.7%, near a decade high and it is a Dividend Contender. Please check Portfolio Insight* for more dividend data and charts.
Related Articles About Pfizer on Dividend Power
Cigna Corporation (CI)
Cigna is a leading provider of insurance products and services. The company’s products include dental, medical, disability, and life insurance, which it provides through employer-sponsored, government-sponsored, and individual coverage plans. Cigna operates four business segments, including Evernorth, which provides pharmacy services and benefit management; U.S. Medical, which provides commercial and government health insurance; International Markets; and Group Disability. Evernorth contributes ~80% of annual revenues, while Cigna Healthcare accounts for much of the rest. Cigna has annual revenues of ~$250 billion.
On January 30th, 2025, Cigna announced it increased its quarterly dividend by 7.9% to $1.51. That same day, Cigna announced fourth-quarter and full-year results for the period ending December 31st, 2024. For the quarter, revenue grew 28.5% to $65.7 billion, which was $2.5 billion better than expected. Adjusted earnings-per-share of $6.64 compared unfavorably to adjusted earnings-per-share of $6.79 in the prior year, which was $1.18 below estimates.
For the year, revenue improved 27% to $247.1 billion while adjusted earnings-per-share of $27.33 compared to $25.09 in the prior year. For the quarter, total customer relationships increased 11% to 182.2 million, but this was down from 183.5 million in Q3 2024. Total pharmacy customers grew 20% year-over-year to nearly 118.3 million, though this was down from 120 million in the preceding period.
Earnings-per-share have a compound annual growth rate of 12.2% for the 2015 through 2024 period. An increase in the share count during this time hides the fact that net profit has more than tripled during this period. Cigna’s growth rate has remained solid in the medium-term as earnings-per-share have a compound annual growth rate of 8.2% over the last five years.
Cigna operates in an industry that tends to hold up well during a recession, as health insurance and pharmacy businesses are still in demand. Earnings-per-share fell from $3.96 in 2007 to $3.42 in 2008 (a 13.6% decrease) but rebounded to make a new high in 2009. Cigna has seen earnings-per-share grow each year since, except for 2016.
Cigna has some immense competitive advantages. The company is one of the most prominent names in its industry, giving it a size and scale that is hard to match. Cigna’s acquisition of Express Scripts appears to have been a solid move, strengthening the company’s presence in its pharmacy business.
Cigna stock yields 4.9% and it is a Dividend Challenger.
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Elevance Health (ELV)
Elevance Health Inc., formerly known as Anthem, Inc., is a healthcare benefits company with over 47 million members through its plans. The company provides managed plans to various markets, including individual, commercial, Medicare, and Medicaid. Its two largest customer groups are government (~60% of annual sales) and commercial business (~30% of sales). Elevance has annual sales of $175 billion. It is our third selection for an undervalued healthcare stock.
On January 22nd, 2025, Elevance raised its quarterly dividend by 4.9% to $1.71, extending its dividend growth streak to 15 consecutive years, making it a Dividend Contender.
On January 23rd, 2025, Elevance announced fourth quarter and full-year results for the period ending December 31st, 2024. For the quarter, revenue grew 5.9% to $45 billion, which topped estimates by $280 million. Adjusted earnings-per-share of $3.84 compared unfavorably to adjusted earnings-per-share of $5.62 in the prior year and was $0.01 below expectations.
For the year, revenue improved 2.9% to $175.2 billion while adjusted earnings-per-share of $33.04 compared to $33.14 in 2023. Adjusted EPS was slightly ahead of our estimates of $33.00. Revenue growth was primarily a result of higher premium yields in the Health Benefits and increases in product revenue for CarelonRx.
A reduction in Medicaid membership once again offsets these gains. The benefit expense ratio increased 320 basis points to 92.4% for the quarter and expanded 150 basis points to 88.5% for the full year due to Medicaid medical costs trends.
Elevance provided guidance for 2025 as well, with the company expecting adjusted earnings-per-share in a range of $34.15 to $34.85. At the midpoint, this would represent a growth of 4.4% from the prior year.
Elevance has increased earnings-per-share at a rate of nearly 15% annually over the last decade. The company has achieved this high rate of growth through improvements in business and aggressive share repurchases. Elevance’s share count has been reduced by 1.3% per year over the last decade. Please check Portfolio Insight* for more data and charts about Elevance.
Disclosure: No positions
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Bob Ciura
Bob Ciura is President of Content at Sure Dividend. Bob has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Prior to joining Sure Dividend, Bob was an independent equity analyst. Bob received a bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.