Healthcare is one of the most profitable industries, and investors can find world-class businesses to buy and hold. While no stock is perfect, industry leaders can become unstoppable long-term wealth creators. Novo Nordisk (NYSE: NVO) and Zoetis (NYSE: ZTS) have recently taken their share.
Still, each company pays growing dividends to shareholders, and both have very bright futures thanks to strong positions in long-term growth trends like obesity drugs and animal care.
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Perhaps the best part is that you can own each stock for less than $200, making them suitable for almost any investing budget. That’s why you might want to jump on them now.
Novo Nordisk plunges on pricing pressure from rivals Eli Lilly and Company and compounding pharmacies, as well as U.S. government pressure to lower drug prices. That said, Novo Nordisk recently launched Wegovy Pills, the first oral GLP-1 agonist weight loss drug approved for sale in the United States. Novo Nordisk sold more than 170,000 scripts in its first month, many of which were new to GLP-1, so the company is attracting new patients.
Management warned that sales could fall 13% this year as competition and pricing plans drive prices down. Novo Nordisk’s revenue has still grown 77% over the past three years, so it’s not a complete disaster. The Danish company pays a semi-annual dividend and increases it as profits grow. If the Wegovy pill can build on its strong launch, the stock will trade at less than 15 times this year’s earnings estimates, potentially bringing in half the dividend income and capital gains.
Zoetis is a leading provider of pharmaceuticals and other therapeutic products for companion animals and livestock. The company has paid and increased its dividend over the past 12 years, and there should be plenty of opportunities to continue growing it. As the world’s population grows, more livestock will be needed. Meanwhile, Millennials and Gen Z are spending more on pets than previous generations. These favorable factors have analysts predicting an annualized growth rate of close to 10% over the next three to five years.
Until recently, the stock had consistently outperformed the market over the past decade. Adverse effects on the company’s canine osteoarthritis drug Librela have given Zoetis enough negative publicity to hurt business performance. Currently, the stock trades at just over 21 times earnings, the lowest price-to-earnings ratio in the stock’s recent history. Zoetis has a diverse product portfolio, so one misstep won’t sink the ship in the long run. Investors who buy in and wait for the noise to die down may see Zoetis resume its unstoppable wealth-building ways in due course.
