How You Can Earn Up to 9.3% Yield from Healthcare Rebate Checks

Get Rich with the Healthcare Industry

Healthcare is expensive. But now there’s a way for income investors get even—by collecting what are known as “healthcare rebate checks.”

According to Fidelity Investments, a 65-year-old couple entering retirement in 2017 in the U.S. would need a whopping $275,000 just to cover healthcare and medical expenses. That number represented a six-percent increase from 2016’s estimate of $260,000. (Source: “Health Care Costs for Retirees Rise to an Estimated $275,000 Fidelity Analysis Shows,” Fidelity Investments Inc., August 24, 2017.)

What does the $275,000 include? Well, Fidelity’s estimate was calculated based on Medicare premiums, Medicare co-payments and deductibles, and out-of-pocket expenses for prescription drugs. The figure does not include the costs associated with a nursing home or long-term care.

Since Fidelity started this annual analysis in 2002, its estimated healthcare costs for retirees have gone up by more than 70%. Going forward, that number will likely keep on increasing.

“These expenses are only expected to increase in the future, so it’s critical that people include health care as a significant part of their retirement plan,” said Adam Stavisky, senior vice president of Fidelity’s “Benefits Consulting Services.” (Source: Ibid.)

In general, healthcare costs tend to rise when people get older. So, when 10,000 baby boomers are turning 65 every day, the healthcare industry is well positioned to capitalize on the aging population.

And that has created a major opportunity for income investors. Because the U.S. healthcare industry is pocketing billions of dollars of profits every year, it makes sense for investors to collect some healthcare rebate checks.

Healthcare Rebate Checks

To put it simply, healthcare rebate checks are dividend checks from healthcare companies with stable operations and solid balance sheets. With the healthcare industry firing on all cylinders, many companies have been generating increasing profits. And with higher profits, they could pay higher dividends.

The neat thing with healthcare rebate checks is that, regardless of where these companies’ stock prices are going, they are well positioned to deliver recurring dividends. In other words, you don’t have to wait for the stock to shoot through the roof to lock in a return. Dividends are always cold, hard cash deposited to your brokerage accounts.

As a matter of fact, all three of the healthcare rebate check companies I’m about to show you pay dividends on a quarterly basis. Therefore, investors can expect to receive their healthcare rebate checks every three months.

And keep in mind that healthcare is known as a recession-proof industry. When the economy enters a downturn, people may not be buying as many new cars as before, but the condition of the macro economy has little effect on people’s decisions to go see a doctor or fill their prescriptions at the pharmacy.

That’s why, in the healthcare industry, there are plenty of companies that have been making handsome profits decade after decade.

For investors of these companies, recurring profits often turn into steady income streams.

Walgreens Boots Alliance Inc

The first on the list of the three healthcare rebate check stocks is Walgreens Boots Alliance Inc (NASDAQ:WBA). If you live in the U.S., Walgreens will likely be a familiar name, since the company has more than 8,000 drugstores located across all 50 states.

Moreover, through its acquisition of Alliance Boots and other equity investments, the company has expanded its presence across the globe. Today, Walgreens has more than 13,200 stores located in 11 countries.

To investors, the company’s growing business has translated to rising healthcare rebate checks. The company has paid increasing dividends every year for the past 42 years. (Source: “Walgreens Boots Alliance Increases Quarterly Dividend,” Walgreens Boots Alliance Inc, July 12, 2017.)

Trading at $62.94 apiece, WBA stock has an annual yield of 2.5%.

Johnson & Johnson

No discussion of healthcare rebate checks is complete without mentioning Johnson & Johnson (NYSE:JNJ). Started by making ready-to-use surgical dressings in the 1880s, Johnson & Johnson has grown to become one of the largest healthcare companies in the world, commanding over $300.0 billion of market cap.

The company stands out when it comes to delivering healthcare rebate checks, having raised its dividend every year for 56 consecutive years. (Source: “Dividend History,” Johnson & Johnson, last accessed May 9, 2018.)

Just think about that for a second. The world economy went through plenty of ups and downs over the last five decades, but nothing stopped JNJ stock from growing its healthcare rebate checks every single year.

With deeply entrenched positions in the consumer goods, pharmaceuticals, and medical devices markets, Johnson & Johnson is set to continue its dividend increase track record. The company currently yields 2.9%.

Omega Healthcare Investors Inc

To round off the list is Omega Healthcare Investors Inc (NYSE:OHI). The company may not be as well known as the other healthcare giants, but it offers investors a staggering annual dividend yield of 9.3%.

One of the factors behind the ultra-high yield is its stable business model. It owns a portfolio of skilled nursing facilities and transitional care properties. By earning a predictable rental income stream from these properties, the company can afford to establish a generous dividend policy.

What’s more, the payout has been growing.

By the first quarter of 2018, Omega Healthcare Investors had increased its dividend every quarter for 22 consecutive quarters. Most recently, the company halted its dividend increases, due to its strategic repositioning activities. However, management remains confident about the sustainability of its current dividend policy. (Source: “Dividends,” Omega Healthcare Investors Inc, last accessed May 9, 2018.)

For 2018, Omega’s adjusted funds from operations is expected to come in between $2.96 and $3.06 per diluted share. If the company achieves its guidance range, it should have no problem covering its annual dividend payment of $2.64 for the year. Further, the 9.3% yield would remain safe.