These days, when it rains on Wall Street, it really pours. Stocks across the board have been falling in response to another inflation report that could convince the Federal Reserve to raise interest rates further.
Rising interest rates could push stocks even lower, or we could be near the start of a long market rally. In uncertain times like these, it’s best to stick with the most reliable stocks the market has to offer.
Here are two health care companies that are poised to turn out growing profits even if the broader economy isn’t willing to cooperate.
Actions of CVS Health (CVS 1.25%) they are down slightly this year, even though things are looking up for the health care conglomerate. Strong growth from a diverse collection of businesses allowed it to increase its dividend payout by 10% earlier this year. The stock is now offering a 2.2% yield and investors can look forward to more gains in the coming years.
CVS Health is one of the most reliable dividend stocks you won’t find on the Dividend Aristocrats list. That’s because the company kept its payout steady from 2017 through 2021 to help pay for the $69 billion acquisition of Aetna. This is a health insurer that collects insurance premiums from approximately 35 million members.
You are most likely familiar with this company’s chain of over 9,000 retail pharmacies. Many of those pharmacies have doctors and nurse practitioners on staff. Sending Aetna members to a CVS pharmacy for care or a prescription lowers costs for CVS Health.
Combining a health insurance business with thousands of retail locations capable of providing health care services also increases profits. The company expects earnings per share to rise 22% this year. As the only major US insurer that also handles day-to-day health care services for its members at retail locations, the advantages that enable CVS Health to outperform appear extremely long-lasting.
Abbott Laboratories (ABT -0.68%) shares soared last year in response to increased sales of its COVID-19 tests. Test kits no longer flying off shelves and a market fearful of rising interest rates have been a bad combination for Abbott’s share price. The stock is down about 25% from the peak it reached late last year.
Abbott stock offers a dividend that has increased 77% in the last five years, and the next five could be even better. The 1.8% yield offered by this stock could now generate big profits, thanks to a small device for diabetic patients. In May, the FDA cleared the company’s new continuous glucose monitor (CGM), the Freestyle Libre 3.
Abbott’s new CGM is about the size of two stacked pennies and is attached to the back of a patient’s arm for two weeks at a time. It’s smaller and more durable than its closest competitor, the G6 from DexCom. DexCom’s long-delayed G7 device could offer some competition in 2024. By then, patients and clinicians already comfortable with Abbott’s device will be hesitant to switch.
In addition to diagnostics and devices for diabetic patients, Abbott manufactures replacement heart valves and other devices to keep pace with our clocks. In August, a clinical trial showed that the company’s HeartMate 3 heart pump increased the five-year survival rate for patients with advanced heart failure to 58%. This survival rate is in line with what cardiologists would expect of similar patients after a complicated transplant procedure.
Inflation or a recession may cause people to spend less on many things, but not on the devices that keep them out of the hospital. Reliable cash flows make Abbott a great stock to buy on the downside and hold for the long term.
Cory Renauer has no position in any of the listed stocks. The Motley Fool recommends CVS Health, CVS Health Corporation, and DexCom. The Motley Fool has a disclosure policy.