Are These Four Health Care Stocks Defensive Enough- CSL, COH, RHC and RMD?

  • Oct 17, 2019 AEDT
  • Team Kalkine
Are These Four Health Care Stocks Defensive Enough- CSL, COH, RHC and RMD?

Defensive stocks are the stocks of companies that deliver constant dividend and stable earnings to their shareholders, regardless of the ongoing volatility in the market. The price of defensive stocks is relatively more stable than the others. Being non-cyclical in nature, defensive stocks are less susceptible to fluctuations throughout various stages of the business cycle and yield a good return during the market’s downturn phase. Hence, investors prefer to pick defensive stocks in their portfolio to alleviate the related risks during the economic recession.

In general, companies dealing in goods and services that meet consumers’ daily needs are considered under defensive stocks. For instance, companies in the fields of health care, consumer staples, water, and gas & electric utilities come under the defensive stock category.

In this article, we would have a look at four of the ASX top tier dividend paying stocks within the health care category; CSL, COH, RHC, RMD. The S&P ASX 200 for this sector, XHJ, was showing an upward trend at 38,373.2 points on 17 October 2019 (AEST 10:55 AM), up 0.5% from its previous close.

CSL Limited (ASX: CSL)

Biotherapeutic giant, CSL Limited (ASX: CSL) develops, manufactures and commercialises novel protein-based pharmaceuticals, cell-culture media & human plasma fractions, with its two key businesses CSL Behring and Seqirus.

On 16 October 2019, the company released results from the 2019 annual general meeting.

Post the release of CSL’s annual results for the year ended 30 June 2019 in August that proclaimed robust profit earnings, the stock has been trading at a market-beating price. CSL recorded a strong revenue growth of 11% on a constant currency basis and net profit after tax of US$1.9 billion for FY2019, up 17% on a constant currency basis.

CSL Dividends with Historical Performance

  • For the fiscal year 2019 that ended 30 June, CSL declared total ordinary dividends valued US$1.85 per share. These dividends are around 44% of CSL’s basic earnings per share (“EPS”), valued at US$4.236.
  • Total dividend consisted an interim dividend, unfranked, amounting to US$0.85 per share and a final dividend, unfranked, amounting to US$1 per share. In agreement with determinations by the Directors, the dividend reinvestment plan remains to be suspended.
  • It was further reported that, the final dividend of US$1 per share, amounted to approximately AU$1.48 for stakeholders having an Australian registered address, and approximately NZ$1.55 for shareholders with address registered at New Zealand, for tax purposes. This dividend was unfranked, and the paid date was 11 October 2019.

Stock Information:

On 17 October 2019 (AEST 11:39 AM), the CSL stock was trading at a high of AU$256.400, up 1.344% from its previous close at AU$253.000. The market capitalisation of the company stood at AU$114.83 billion with approx. 453.86 million outstanding shares.

Cochlear Limited (ASX: COH)

New South Wales, Australia-based Cochlear Limited (ASX: COH) is a healthcare sector company that offers a range of implantable hearing solutions to customers across the globe including the US, Africa, Europe, Middle East and Asia-Pacific.

COH’s Robust Financial Position

COH released its annual results for the financial year 2019 ended 30 June 2019, revealing a strong financial position. Key highlights are as follows:

  • Strong uptake of COH’s Nucleus® 7 Sound Processor resulted in a rise of upgrade revenue by 17% on a constant currency basis.
  • COH reported increase in underlying net profit of 7% (6% on a constant currency basis) amounting to AU$265.9 million, which was delivered in accordance with the guidance range.
  • Cochlear implants had seen improved sales (58% of sales revenue), after the launch of new product Nucleus® ProfileTM Plus Series cochlear implant.
  • On a constant currency basis, sales revenue for Cochlear implants decreased by 3% on pcp, services sales revenue (30% of sales revenue) grew by 14% and acoustics sales revenue (12% of sales revenue) declined by 1%.
  • COH recorded a rise in operating cash flow by AU$37.9 million to AU$296 million.

COH’s Dividend with Historical Performance

The company’s Board had declared a final dividend of AU$1.75 per share, fully franked (100%), showing an increase of 9%, resulting in an increase of full year dividend by 10% amounting to AU$3.30 per share, fully franked (100%), reflecting a payout of 69% of reported net profit.

This was underpinned by a solid free cash flow and a consistently strong balance sheet. Dividend record date was 20 September 2019 and the final dividend was paid on 14 October 2019.

Stock Information:

On 17 October 2019 (AEST: 11:56 AM), COH’s share was trading at AU$212.230, down 0.734% from its previous close at AU$213.800. The market capitalisation of the company stood at AU$12.36 billion with approx. 57.81 million outstanding shares. Year-to-date returns were up 22.4%.

Ramsay Health Care Limited (ASX: RHC)

Headquartered in Sydney, Ramsay Health Care Limited (ASX: RHC) is a health care giant that delivers high quality products for patients ensuring long term effectiveness. Operating in 480 locations, Ramsay is one of the most diverse global hospital groups and well-respected in the industry.

On 17 October 2019, the company unveiled a change in the interest of one of its directors Craig Ralph McNally following the acquisition of 9,122 ordinary shares.

FY2019 Financial Highlights for the period ended 30 June 2019

  • RHC generated a revenue of AU$11.4 billion, up 24.4% on the previous year.
  • Group earnings before interest, tax, depreciation & amortization (EBTIDA) rose 14.1% on previous year, amounting to AU$1.6 billion.
  • Core earnings per share increased 2.1% compared to the previous year, and with Capio acquisition excluded the core EPS were reported up by 2.7% to 287.3 cents.

Financial Highlights (Source: Company’s Report)

RHC’s Dividend with Historical Performance

  • For the year ended 30 June 2019, RHC declared a full year dividend, fully franked, valued 151.5 cents, up 5.2% as compared to the previous corresponding period.
  • RHC recommended a final dividend at the rate of 91.5 cents per share amounting to AU$184,904,000, relative to AU$174,800,000 for the year 2018 at the rate of 86.5 cents.
  • Interim dividend paid during 2019 was AU$121,249,000 at the rate of 60.0 cents per share in comparison to AU$116,198,000 for the year 2018 at the rate of 57.5 cents per share.
  • Dividends paid or recommended for payment on CARES included a final dividend that was recommended at AU$2.29 per security, amounted to AU$5,962,000 and for 2018 it was AU$6,466,000 at AU$2.49.
  • Interim dividend paid during 2019 amounted to AU$6,333,000 at AU$2.44 per security while for 2018 interim dividend paid was AU$6,117,000 at AU$2.35.
  • The tax rate at which paid dividends have been franked and recommended dividends will be franked is 30% (2018: 30%).

Stock Information:

On 17 October 2019 (AEST 12:08 PM), RHC’s share was trading at AU$68.640, up 0.146% from its previous close at AU$68.540. The market capitalisation of the company stood at AU$13.85 billion with approx. 202.08 million outstanding shares. Year-to-date returns were up 18.66%.

ResMed Inc. (ASX: RMD)

Large cap health care company, ResMed Inc. (ASX: RMD) is focused on medical equipment used for the treatment of sleep disordered breathing including their development, manufacturing and marketing. ResMed is a global leader in the management of sleep apnea and COPD with its leading remote monitoring software.

The company is scheduled to release its first quarter fiscal 2020 results on 24 October 2019.

Highlights of Full Year 2019 ended 30 June 2019

  • Increase of 11% in revenue for the full year 2019 amounting to AU$2.6 billion, which is up 13% on a constant currency basis.
  • RMD’s gross margin extended 80 bps that amounted to 59.0%
  • RMD recorded an increase in net operating profit of 7% and non-GAAP operating profit noted an increase of 18%.
  • RMD reported GAAP diluted EPS of AU$2.80; non-GAAP diluted EPS of AU$3.64.

RMD’s Dividend with Historical Performance

  • During the fourth quarter of 2019, RMD’s cash flow from operations valued AU$141.8 million, relative to the net income of AU$68.8 million in the present quarter. During the quarter, RMD paid AU$53.1 million in dividend.
  • Dated 25 July 2019, RMD announced a quarterly cash dividend of US$0.39 per share, up by 5% year-on-year.
  • Dividend was recorded on 15 August 2019 and paid on 19 September 2019.
  • Ex-dividend was recorded on 14 August 2019 for common stockholders and CDI holders.

RMD’s Dividend History. Source: ASX

Stock Information

On 17 October 2019 (AEST 12:21 PM), RMD’s share was trading at AU$19.475, down 1.09% from its previous close at AU$19.690. The market capitalisation of the company stood at AU$28.22 billion with approx. 1.43 billion outstanding shares. Year-to-date returns were up 22.76%


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