Peer Pressure to Drive Dividend Growth in Health Sector

May 14, 2012 1:17 PM EDT
Moody's analysts expect peer pressure will force more healthcare companies to raise or initiate dividends.

"Investors dissatisfied with current low interest rates are increasingly interested in generating immediate income from dividends," said Jessica Gladstone, a Moody's Vice President.

"Healthcare companies will find themselves pressured to initiate or increase dividends as their peers begin paying out."

As a result of the increased dividends, more aggressive moves such as acquisitions or share buybacks are likely to begin, and lower-rated companies in the industry with greater business risk and cash flow volatility will be squeezed.

Investors interested in this sector can purchase Health Care Select Sector SPDR (NYSE: XLV).

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