These 10 S&P 500 Health Care Companies Are the Most Shareholder Friendly

Which health care companies have traditionally been the most shareholder friendly? Turns out Pfizer (PFE) , which agreed on Monday to merge with Allergan (AGN) , is one of them. But what about the rest of the sector?

Health care companies have been actively returning capital to shareholders over the past 10 years, but not all of its sub-industries were active participants. However, that may change, particularly as several biotech companies start to mature, according to a report by S&P Capital IQ.

"Biotech has been increasingly active in repurchasing shares during the past five years," the Oct. 19 report said. "We expect these trends to continue in the next several years, and we anticipate that more biotech companies will engage in similar capital deployment activities in the future as their businesses mature and they begin generating steady cash flows. Although we do not anticipate biotech to overtake the pharmaceutical industry."

S&P 500 companies are increasingly deploying cash to shareholders via stock repurchases and dividend payouts, and with more than $1 trillion in cash on their balance sheets as of June, that trend is likely to continue, according to S&P Capital IQ.

Two of the top 10 S&P 500 companies with the most buybacks and dividends combined from 2005 to 2014 were health care companies.

Overall, the health care sector paid out $286.8 billion in dividends and repurchased $502 billion in stock for the 10 years through 2014. The sector also generated $1.2 trillion in cash flow from operations over the same time period, which equated to dividend and buyback activity representing 64.8% of total cash flow from operations, the report said.

"Health care companies have witnessed healthy buyback and dividend activity in the past few years," the Oct. 19 report said. "Most S&P 500 pharmaceutical companies repurchase stock and pay dividends, and it recently was the only health care subindustry with a dividend yield (2.5%) above the market's (2.2%)."

So which health care companies have led the way with the most returned capital to shareholders over the past 10 years? Here's the list, in order of least to most, along with ratings from TheStreet Ratings for additional perspective.

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equity market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Note: Year-to-date returns are based on Nov. 20 closing prices.

MDT Chart MDT data by YCharts

10. Medtronic Plc (MDT)
Industry: Health Care/Health Care Equipment
Year-to-date return: 4.7%

Total Returned Capital 2005-2014: $24.4 billion
Dividends 2005-2014: $8.44 billion
Buybacks 2005-2014: $15.96 billion

TheStreet Said: TheStreet Ratings team rates MEDTRONIC PLC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

We rate MEDTRONIC PLC (MDT) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MDT's very impressive revenue growth greatly exceeded the industry average of 37.8%. Since the same quarter one year prior, revenues leaped by 70.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 163.22% to $816.00 million when compared to the same quarter last year. In addition, MEDTRONIC PLC has also vastly surpassed the industry average cash flow growth rate of -14.68%.
  • MDT's debt-to-equity ratio of 0.67 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 2.98 is very high and demonstrates very strong liquidity.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: MDT

 

BMY Chart BMY data by YCharts

9. Bristol-Myers Squibb Co. (BMY)
Industry: Health Care/Pharmaceuticals
Year-to-date return: 14.9%

Total Returned Capital 2005-2014: $27.6 billion
Dividends 2005-2014: $22.99 billion
Buybacks 2005-2014: $4.63 billion

TheStreet Said: TheStreet Ratings team rates BRISTOL-MYERS SQUIBB CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate BRISTOL-MYERS SQUIBB CO (BMY) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • BMY's revenue growth has slightly outpaced the industry average of 3.7%. Since the same quarter one year prior, revenues slightly increased by 3.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.14, which illustrates the ability to avoid short-term cash problems.
  • BRISTOL-MYERS SQUIBB CO' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, BRISTOL-MYERS SQUIBB CO reported lower earnings of $1.20 versus $1.55 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $1.20).
  • The gross profit margin for BRISTOL-MYERS SQUIBB CO is currently very high, coming in at 77.81%. Regardless of BMY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BMY's net profit margin of 17.35% is significantly lower than the industry average.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: BMY

 

ANTM Chart ANTM data by YCharts

8. Anthem Inc. (ANTM)
Industry: Health Care/Managed Health Care
Year-to-date return: 4.5%

Total Returned Capital 2005-2014: $33.11 billion
Dividends 2005-2014: $1.65 billion
Buybacks 2005-2014: $31.46 billion

TheStreet Said: TheStreet Ratings team rates ANTHEM INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate ANTHEM INC (ANTM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ANTHEM INC has improved earnings per share by 9.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ANTHEM INC increased its bottom line by earning $8.95 versus $8.66 in the prior year. This year, the market expects an improvement in earnings ($10.20 versus $8.95).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income increased by 3.8% when compared to the same quarter one year prior, going from $630.90 million to $654.80 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.0%. Since the same quarter one year prior, revenues slightly increased by 7.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, ANTM has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
  • You can view the full analysis from the report here: ANTM

 

ABT Chart ABT data by YCharts

7. Abbott Laboratories (ABT)
Industry: Health Care/Health Care Equipment
Year-to-date return: 2.2%

Total Returned Capital 2005-2014: $33.16 billion
Dividends 2005-2014: $21.02 billion
Buybacks 2005-2014: $12.13 billion

TheStreet Said: TheStreet Ratings team rates ABBOTT LABORATORIES as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

We rate ABBOTT LABORATORIES (ABT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Health Care Equipment & Supplies industry average. The net income increased by 8.0% when compared to the same quarter one year prior, going from $537.00 million to $580.00 million.
  • The revenue growth significantly trails the industry average of 37.8%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.10, which illustrates the ability to avoid short-term cash problems.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
  • You can view the full analysis from the report here: ABT

 

HCA Chart HCA data by YCharts

6. HCA Holdings Inc. (HCA)
Industry: Health Care/Health Care Facilities
Year-to-date return: -8.1%

Total Returned Capital 2005-2014: $33.54 billion
Dividends 2005-2014: $6.91 billion
Buybacks 2005-2014: $26.62 billion

TheStreet Said: TheStreet Ratings team rates HCA HOLDINGS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

We rate HCA HOLDINGS INC (HCA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its revenue growth. At the same time, however, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.0%. Since the same quarter one year prior, revenues slightly increased by 6.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • HCA HOLDINGS INC's earnings per share declined by 9.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HCA HOLDINGS INC increased its bottom line by earning $4.18 versus $3.36 in the prior year. This year, the market expects an improvement in earnings ($5.25 versus $4.18).
  • Net operating cash flow has declined marginally to $1,101.00 million or 2.39% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Health Care Providers & Services industry average, but is greater than that of the S&P 500. The net income has decreased by 13.3% when compared to the same quarter one year ago, dropping from $518.00 million to $449.00 million.
  • You can view the full analysis from the report here: HCA

 

UNH Chart UNH data by YCharts

5. United Health Group Inc. (UNH)
Industry: Health Care/Managed Health Care
Year-to-date return: 11.7%

Total Returned Capital 2005-2014: $36.27 billion
Dividends 2005-2014: $4.51 billion
Buybacks 2005-2014: $31.75 billion

TheStreet Said:  TheStreet Ratings team rates UNITEDHEALTH GROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate UNITEDHEALTH GROUP INC (UNH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10.0%. Since the same quarter one year prior, revenues rose by 26.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Health Care Providers & Services industry and the overall market, UNITEDHEALTH GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • UNITEDHEALTH GROUP INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, UNITEDHEALTH GROUP INC increased its bottom line by earning $5.70 versus $5.50 in the prior year. This year, the market expects an improvement in earnings ($6.30 versus $5.70).
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Health Care Providers & Services industry average. The net income has decreased by 0.3% when compared to the same quarter one year ago, dropping from $1,602.00 million to $1,597.00 million.
  • You can view the full analysis from the report here: UNH

 

AMGN Chart AMGN data by YCharts

4. Amgen Inc. (AMGN)
Industry: Health Care/Biotech
Year-to-date return: 0.39%

Total Returned Capital 2005-2014: $39.56 billion
Dividends 2005-2014: $4.88 billion
Buybacks 2005-2014: $34.68 billion

TheStreet Said: TheStreet Ratings team rates AMGEN INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate AMGEN INC (AMGN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, reasonable valuation levels and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AMGN's revenue growth has slightly outpaced the industry average of 13.4%. Since the same quarter one year prior, revenues rose by 13.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • AMGEN INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AMGEN INC increased its bottom line by earning $6.70 versus $6.65 in the prior year. This year, the market expects an improvement in earnings ($10.06 versus $6.70).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Biotechnology industry average. The net income increased by 49.8% when compared to the same quarter one year prior, rising from $1,244.00 million to $1,863.00 million.
  • Net operating cash flow has slightly increased to $2,874.00 million or 4.85% when compared to the same quarter last year. In addition, AMGEN INC has also modestly surpassed the industry average cash flow growth rate of 1.29%.
  • You can view the full analysis from the report here: AMGN

 

MRK Chart MRK data by YCharts

3. Merck & Co. Inc. (MRK)
Industry: Health Care/Pharmaceuticals
Year-to-date return: -4.7%

Total Returned Capital 2005-2014: $68.1 billion
Dividends 2005-2014: $41.6 billion
Buybacks 2005-2014: $26.49 billion

TheStreet Said: TheStreet Ratings team rates MERCK & CO as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

We rate MERCK & CO (MRK) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels, compelling growth in net income and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Pharmaceuticals industry. The net income increased by 104.0% when compared to the same quarter one year prior, rising from $895.00 million to $1,826.00 million.
  • The current debt-to-equity ratio, 0.59, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.34, which illustrates the ability to avoid short-term cash problems.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. When compared to other companies in the Pharmaceuticals industry and the overall market, MERCK & CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • The gross profit margin for MERCK & CO is currently very high, coming in at 78.75%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, MRK's net profit margin of 18.12% significantly trails the industry average.
  • You can view the full analysis from the report here: MRK

 

JNJ Chart JNJ data by YCharts

2. Johnson & Johnson (JNJ)
Industry: Health Care/Pharmaceuticals
Year-to-date return: -2%

Total Returned Capital 2005-2014: $108.4 billion
Dividends 2005-2014: $56.7 billion
Buybacks 2005-2014: $51.73 billion

TheStreet Said: TheStreet Ratings team rates JOHNSON & JOHNSON as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

We rate JOHNSON & JOHNSON (JNJ) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JNJ's debt-to-equity ratio is very low at 0.28 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, JNJ has a quick ratio of 1.93, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $6,125.00 million or 31.60% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.80%.
  • JOHNSON & JOHNSON's earnings per share declined by 27.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, JOHNSON & JOHNSON increased its bottom line by earning $5.70 versus $4.82 in the prior year. This year, the market expects an improvement in earnings ($6.18 versus $5.70).
  • The gross profit margin for JOHNSON & JOHNSON is currently very high, coming in at 74.89%. Regardless of JNJ's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.63% trails the industry average.
  • You can view the full analysis from the report here: JNJ

PFE Chart PFE data by YCharts

1. Pfizer Inc. (PFE)
Industry: Health Care/Pharmaceuticals
Year-to-date return: 3.3%

Total Returned Capital 2005-2014: $127.37 billion
Dividends 2005-2014: $66.58 billion
Buybacks 2005-2014: $60.78 billion

TheStreet Said: TheStreet Ratings team rates PFIZER INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

We rate PFIZER INC (PFE) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, expanding profit margins and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.08, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $5,024.00 million or 12.57% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -0.80%.
  • The gross profit margin for PFIZER INC is currently very high, coming in at 84.60%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, PFE's net profit margin of 17.61% significantly trails the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: PFE

 

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