Top Healthcare Stocks to Consider Amid Market Challenges

The S&P 500’s 9% decline in 2025, provoked by President Trump’s tariffs and ramped-up trade tensions with China, has created a difficult investment environment. Despite this setback, select healthcare stocks exhibit resilience, providing attractive dividend yields of over 3%, maintained histories of dividend growth, and a degree of insulation from the impacts of trade conflicts. For investors looking to reduce volatility in these uncertain times, three healthcare sector stocks are worth serious consideration. For those seeking upside with reduced volatility compared to individual stocks, the High-Quality Portfolio, which has outperformed the S&P 500 with returns exceeding 91% since its inception, merits attention.

Image by Thomas Breher from Pixabay

1. Bristol Myers Squibb (BMY)

Key Investment Attributes:

• Robust 3.9% dividend yield with a 3.4% average annual dividend growth over three years.
• Notable 7% revenue growth in the past twelve months.
• Strong profitability evidenced by 12% operating margin and over 30% operating cash flow margin.
• The stock has already experienced a 10% correction this year, possibly limiting future downside.

Strategic Advantages:

• Pharmaceutical products are currently exempt from tariff impacts.
• Successfully compensating for declining legacy product sales with strategic growth in newer offerings.
• FDA approval of Cobenfy strengthens its product portfolio, bolstered by a promising drug pipeline for future growth.
• Diversified revenue across various therapeutic areas reduces reliance on any single market.

2. Merck (MRK)

Key Investment Attributes:

• Appealing 3.5% dividend yield coupled with a solid 5.7% annual dividend growth rate.
• Strong 7% revenue growth recorded in the last twelve months.
• Exceptional profitability with around 30% cash flow and operating margins.
• The stock has undergone a significant 20% correction this year, partly due to a slowdown in Gardasil vaccine sales in China.

Strategic Advantages:

• Protection from tariff effects due to pharmaceutical exemption status.
• Keytruda continues to dominate the market with expanding approvals, generating $30 billion in annual sales and maintaining three years of market exclusivity.
• A robust pipeline hosts several promising blockbuster candidates, including MK0616, Bomedemstat, and Patritumab Deruxtecan.
• Strong R&D capabilities underline consistent innovation across various therapeutic domains.

3. Medtronic (MDT)

Key Investment Attributes:

• Consistent 3.1% dividend yield accompanied by steady 3% annual dividend growth.
• Moderate 2% revenue growth observed in the last twelve months, supported by an 18% operating margin and a 22% operating cash flow margin.
• The stock has shown positive performance this year despite overall market weakness.

Strategic Advantages:

• Low exposure to China, with imports contributing less than 1% to revenue and China sales making up only 7% of total revenue.
• Innovations in surgical products and the diabetes portfolio are now accelerating with double-digit growth.
• Market leadership across various medical device segments supports sustainable competitive advantages.
• The recurring revenue model from consumable products provides stability amid economic uncertainties.

Conclusion

Amid heightened volatility and trade tensions in the current market, these three healthcare dividend stocks provide a balanced approach to income generation while offering a defensive stance against the 2025 downturn. Each of these healthcare dividend leaders deserves strong consideration as essential elements for managing risk while remaining positioned for long-term growth in the healthcare sector.

You may also explore the Trefis RV strategy, which has outperformed its all-cap benchmark stocks (including the S&P 500, S&P mid-cap, and Russell 2000) providing investors with solid returns. Additionally, for those seeking smoother upside compared to individual stocks, consider the High-Quality Portfolio, which also outperformed the S&P while achieving over 91% returns since inception.

Invest with Trefis Market-Beating Portfolios
Discover all Trefis Price Estimates

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.