A Trio of International Health Care Stocks for Income

U.S. investors often focus on owning domestic companies, as this is the region of the world they are likely most familiar with. As such, this can limit the number of quality stocks available to them for purchase.

However, the world is big, and it offers a larger pool of possible opportunities for investors willing to look overseas. This is also true for investors looking for market beating dividend yields, though dividend growth can be subject to the impact of fluctuating currency rates.

In this article, we will examine three high-yielding health care stocks that are based in Europe, all of which U.S. based investors can own through their American Depository Receipts (ADRs).

AstraZeneca

AstraZeneca plc (

AZN, Financial) was formed in the late 1990s as a result of the merger between Astra and Zeneca. The company’s products are used to treat a wide variety of ailments, including diseases in the treatment areas of cardiovascular, inflammation and oncology. AstraZeneca also has a Covid-19 vaccine that has been approved for use in more 170 countries. The company has a market capitalization of $175 billion and generates annual revenue approaching $27 billion.

Unlike the other names discussed in this article, AstraZeneca hasn’t raised its dividend in nearly a decade. U.S. shareholders have received the same $1.40 dividend every year since 2013. AstraZeneca also differs from most domestic companies in that it pays its dividend twice per year, with the larger payment occurring near the end of March with a smaller distribution taking place in mid-September.

Nevertheless, the stock’s yield of 2.5% is more than a full percentage point above the average yield of 1.3% for the S&P 500 index. It should be noted that this is below the yield of 4.5% that AstraZeneca has averaged since 2011, according to Value Line.

While shareholders shouldn’t expect dividend growth given the company’s history, it is likely that the dividend is well protected. Wall Street analysts expect that AstraZeneca will earn $3.63per share in 2021, resulting in a projected payout ratio of 39%. This would be the company’s second lowest payout ratio of the last 10 years if achieved.

Using the current stock price of at $56.34 and analysts’ estimates for the year, AstraZeneca has a forward price-earnings ratio of 15.5. Were the stock to average this multiple for an entire year it would be the lowest since 2012. However, due to exchange rates, the price-earning ratio may not be an accurate assessment of the stock’s true valuation.

Shares of AstraZeneca have returned 12.7% so far in 2021, but the GuruFocus Value Chart shows that the stock is trading just below its intrinsic value.

With a current share price of $56.34 and a GF Value of $57.56, AstraZeneca has a price-to-GF-Value ratio of 0.98. Shares earn a rating of fairly valued from GuruFocus.

Novartis

Novartis AG (

NVS, Financial) is one of the largest drug manufacturers in the world and focuses on providing treatment in the areas of cardiovascular, dermatology, oncology and respiratory. The company is headquartered in Switzerland. Novartis had revenue of $49 billion in 2020 and is valued at $183 billion today.

U.S. investors have seen their dividends compound at an annual rate of just 3% over the last decade, but Novartis has raised its dividend for 25 consecutive years in local currency. The company has shown a dedication to growing its dividend that AstraZeneca has not.

Novartis yields 3.9%, three times the U.S. market’s average yield. The current yield also surpasses that stock’s 10-year average yield of 3.5%.

The company pays an annual dividend, usually in March of each year. This year’s annual dividend totaled $3.20. With analysts calling for earnings per share of $6.30, Novartis has a projected payout ratio of 51% for 2021. This would be one of the lowest payout ratios of the last decade if it occurs.

Novartis is trading with a forward price-earnings ratio of 13 based on Wednesday’s closing price of $81.91 and analysts estimates for 2021. This is one of the cheaper valuations for the stock since early last decade. Part of the lower than usual valuation is the result of a more than 13% decline in share price in 2021.

The stock does appear to be undervalued relative to its GuruFocus Value chart by a solid amount:

Novartis has a GF Value of $95.78, equating to a price-to-GF-Value ratio of 0.86. Shares would gain nearly 17% were they to reach the stock’s GF Value. Add in the dividend yield and total returns could stretch into the 20% range. Novartis is rated as modestly undervalued.

Sanofi

Sanofi SA (

SNY, Financial) has been in existence since 1994. Incorporated in France, the company has three business segments: pharmaceuticals, vaccines and consumer health care. Sanofi has annual revenues of almost $42 billion and a market capitalization of $122 billion.

Sanofi’s dividend growth looks highly erratic since 2011, but that is due again to currency exchange rates. The company has raised its dividend for 27 consecutive years in local currency.

The yield on the stock is 3.89%, matching Sanofi’s long-term average yield. Shareholders usually receive their annual dividend near the end of May or at the beginning of June.

Using this year’s annual dividend of $1.93 and expected earnings per share of $3.79 for 2021, Sanofi has an expected dividend payout ratio of 51%. This would be the company’s second lowest payout ratio since 2011 if it comes to fruition.

Shares of Sanofi are down marginally for the year and currently trade hands at $49.13. This gives the stock a forward price-earnings ratio of 13 using analysts’ estimates for the year, which is near the low end of stock’s valuation range since 2011.

Sanofi appears to be slightly ahead of its intrinsic value based on the GuruFocus Value chart:

With a GF Value of $47.92, Sanofi has a price-to-GF-Value ratio of 1.03. The stock is rated as fairly valued.

Final thoughts

U.S. investors looking to own the best names in the market shouldn’t limit themselves simply to the region they know best. Stocks headquartered in different countries can provide high levels of income as well.

AstraZeneca, Novartis and Sanofi are three international healthcare stocks that offer dividend yields well above what the S&P 500 index stocks average. None of the three are wildly overvalued against their intrinsic value estimates, with Novartis offering the possibility of a near 20% total return. Investors looking for exposure and income from international stocks could thus consider adding these three stocks to their watch lists.