The healthcare sector is considered a defensive group, which should increase its allure in turbulent market climates, such as the current setting.
Recent data suggest that healthcare is one of a small number of sectors seeing net positive flows in recent weeks, and that could be a positive for a variety of exchange traded funds, including the IQ Healthy Hearts ETF (HART).
One of the Dual Impact exchange traded funds from New York Life Investments (NYLIM), HART could be a nifty consideration for tactical investors in a more sanguine market environment because in addition to healthcare holdings, the ETF also features exposure to growth outlets, such as consumer discretionary, communication services, and technology stocks. Still, HART’s 69.5% healthcare weight is more than appropriate in the current environment.
“Investors have looked to health care as a port in the storm during the stock market’s volatility over the last year. Now, in a rising interest rate environment, some parts of the sector may be poised for even better returns thanks to their dividends,” reported Bertha Coombs for CNBC.
Good news for investors considering HART: The bulk of the ETF’s healthcare components are high quality, dividend-paying companies. Just look at the healthcare stocks residing among HART’s top 10 holdings. Those include Dow Jones Industrial Average members Johnson & Johnson (NYSE:JNJ), UnitedHealth (NYSE:UNH), and Merck (NYSE:MRK), as well as Pfizer (NYSE:PFE) and AstraZeneca (NASDAQ:AZN).
Those stocks are sporting dividend yields in excess of the broader market due in part to faltering prices this year, but there may be value in the group.
“The stocks are worth more than their dividend payout. Demand for pharmaceuticals will remain robust and has proven itself as a good play in a slowdown/recession scenario,” said Chantico Global CEO Gina Sanchez in an interview with CNBC’s Coombs.
Further supporting the case for HART as a healthcare play is that many of its holdings from the sector, including the aforementioned quartet, aren’t just dividend payers. They’re dividend growers — some of with payout increases that span multiple decades.
Alone, that’s impressive, but it’s even more notable today because HART offers significantly more upside potential than bonds, and dividend growth is a viable option for investors seeking inflation protection. On that note, Apple (NASDAQ:AAPL), which is the ETF’s largest tech holding, has its own impressive track record of boosting payouts.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.