Australians are living longer than previous generations, and most, are enjoying a greater standard of living and better access to high-quality healthcare. While living longer is a positive outcome for individuals, increased lifespan and older age generally result in increased ill health, placing a higher demand for health services.
An ever-increasing demand for health services will benefit many of the listed players in the Australian healthcare sector, as will the continual significant federal budget healthcare spend which will increase along-side demographic growth.
As a result of living longer, the proportion of older people in the Australian population is increasing, i.e. the number of people ages 65 and over has more than tripled over the last 50 years!
Let’s consider some of the stocks listed on the ASX that may benefit from an ageing population, and the opportunities for savvy investors looking to take advantage of future capital growth in these companies. Healthcare stocks typically don’t pay large dividends as they normally retain their profits to go towards improved services and product development. The focus of investors in healthcare is normally capital growth. An investment in the healthcare sector will also offer investors an opportunity to diversify their portfolios, away from their traditional heavily weighted financial and resources exposures.
CSL Limited (CSL)
CSL is a biopharmaceutical company that researches, develops, manufactures, markets, and distributes products to treat and prevent human medical conditions including coagulation disorders, viral and bacterial diseases, bleeding disorders and other diseases. CSL has manufacturing operations in the United States, United Kingdom, Germany, Switzerland, and Australia.
Current share price: $271.42 Current dividend yield: 1.11% fully franked
Ramsay Health Care (RHC)
RHC is an operator of approximately 460 hospital, day surgery and healthcare facilities throughout Australia, Asia Pacific, the United Kingdom and several European countries. Ramsay caters for a range of health care needs from day surgery procedures to complex surgery, as well as psychiatric care and rehabilitation. Here on the Gold Coast – Pindara Private Hospital and John Flynn Hospital are Ramsay’s major operations – and the revenues they generate contribute towards the profits and growth of the company. While offering only a modest dividend yield – this company presents strong capital growth opportunities.
Sonic Healthcare (SHL)
SHL is an international medical diagnostics company, offering laboratory, medicine, pathology, ultrasound and imaging/radiology services to the medical community. They also provide administrative services and facilities to medical practitioners. SHL provides the services and infrastructure in eight countries: Australia; New Zealand; the UK; Germany; Switzerland; Belgium; Ireland; and the USA.
Current share price: $34.19 Current dividend yield: 2.78% fully franked
Medibank Private (MPL)
MPL’s core business is the underwriting and distribution of Private Health Insurance policies through its two brands – Medibank and AHM. They offer hospital and extras cover to customers in Australia as well as health insurance to overseas visitors and students. They also participate in the broader healthcare industry through the provision of integrated healthcare services to policyholders, government, corporate and other customers. They do present investors an opportunity to invest in a large heavyweight in the health insurance sector.
Current share price: $3.16 Current dividend yield: 4.11% fully franked
Invocare (IVC)
While none of us like to think about death, it is another part of the health sector that will of course be affected by an ageing population. IVC owns and operates funeral homes, dhl logocemeteries and crematoria around Australia, New Zealand, and Singapore. Key funeral brands are White Lady Funerals, Simplicity Funerals and Singapore Casket. The company currently operate approximately 290 funeral homes and 17 cemeteries and crematoria. It has also branched out to now offer pet cremation services under the Patch & Purr, Pets in Peach, and Family Pet Care brands. They also offer digital funeral services and prepaid funeral arrangements.
Current share price: $10.70 Current dividend yield: 1.96% fully franked
Healthcare Exchange Traded Funds
Instead of selecting one of the many listed healthcare companies, there are a few Exchange Trade Funds or ETF’s that offer exposure to the sector that will offer you exposure to healthcare and eliminate the need to pick just one stock. Many of these ETF’s will also provide exposure to international healthcare companies, as many of the giants of the industry aren’t listed in Australia, so this is also a clever way to gain exposure to some international healthcare players.
S&P Biotech ETF (CURE), Betashares Global Healthcare ETF (DRUG), VanEck Global Healthcare Leaders ETF (HLTH), iShares S&P Global Healthcare ETF (IXJ).
All of these ETF’s will offer exposure to a slightly different mix of healthcare companies and might be a good alternative to add exposure to the sector to a portfolio.
There are many opportunities for investors in the healthcare sector, with only a few listed above. Listed companies range from big players to small start-ups and everywhere in between, giving great flexibility and choice. If your portfolio doesn’t include exposure to the Australian healthcare sector, perhaps you should consider adding one of these stocks into the mix.
If you have any questions about any of the healthcare stocks mentioned above or would like to further discuss an opportunity to invest in the healthcare sector, please contact your iInvest advisor.
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