3 Healthcare ETFs to Buy for Defensive Growth

The healthcare market’s outlook shines as organizations increasingly adopt generative AI to enhance customer experiences, boost efficiency, and address rising costs, fostering innovation and resilience. With their essential services and ongoing investments in technology and security, healthcare ETFs remain a robust choice for defensive growth during uncertain times.

Investors might consider healthcare ETFs like iShares U.S. Healthcare ETF (IYH), The Health Care Select Sector SPDR Fund (XLV), and Vanguard Health Care Index Fund ETF Shares (VHT) for stable growth potential.

The healthcare sector’s stability during economic downturns makes ETFs in this space a safer investment. These funds offer diversified exposure to subsectors like pharmaceuticals, biotechnology, and medical devices, reducing individual stock risks. Additionally, the growing demand for healthcare services driven by an aging population ensures steady sector growth.

Furthermore, ongoing investment in R&D to address unmet clinical needs and improve consumer health outcomes keeps companies ahead of the competition. Additionally, the rise of e-commerce and omni-channel experiences is transforming how consumers purchase health products. As a result, the global healthcare market is projected to grow at a 22.3% CAGR, reaching $9.01 billion by 2028.

Given this favorable backdrop, let’s evaluate the three Health & Biotech ETFs picks, starting with number three.

ETF #3: iShares U.S. Healthcare ETF (IYH)

IYH is an exchange-traded fund launched by BlackRock, Inc. The fund is managed by BlackRock Fund Advisors and invests in the public equity markets of the United States. It focuses on stocks of companies operating across the healthcare sector and includes growth and value stocks of companies with diversified market capitalizations. The fund seeks to track the performance of the Russell 1000 Health Care RIC 22.5/45 Capped Index using a representative sampling technique.

With $3.32 billion in assets under management (AUM), IYH’s top holding is Eli Lilly and Company (LLY) with an 11.08% weighting, followed by UnitedHealth Group Incorporated (UNH), with a 10.11% weighting, and Johnson & Johnson (JNJ), with 6.89%. It has a total of 109 holdings.

It has an expense ratio of 0.39%, lower than the category average of 0.52%. It currently has a NAV of $62.49. IYH’s fund inflows came in at $24.39 million over the past month.

The fund’s annual dividend of $0.70 yields 1.18% on the current share price. Its four-year average yield is 1.11%. Moreover, its dividend payouts have increased at a CAGR of 8% over the past three years.

IYH has gained 11.6% over the past year and 4.3% year-to-date to close the last trading session at $59.73.

IYH’s POWR Ratings reflect this promising outlook. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

IYH has a B grade for Buy & Hold. Of the 42 ETFs in the Health & Biotech ETFs group, it is ranked #28. Click here to access all of IYH’s POWR Ratings.

ETF #2: The Health Care Select Sector SPDR Fund (XLV)

XLV is an ETF launched by State Street Global Advisors, Inc. and managed by SSGA Funds Management, Inc. The fund invests in the public equity markets of the United States, focusing on stocks of companies operating across the healthcare sector. It includes growth and value stocks of companies with diversified market capitalizations. The fund seeks to track the performance of the Health Care Select Sector Index using a full replication technique.

With $39.59 million in assets under management (AUM), XLV’s top holding is LLY with an 11.71% weighting, followed by UNH with a 10.34% weighting, and JNJ with 6.90%. XLV has a total of 63 holdings.

XLV has an expense ratio of 0.09%, lower than the category average of 0.52%. It currently has a NAV of $149.02. Its fund inflows came in at $472.36 million over the past three months.

The ETF pays an annual dividend of $2.27, which yields 1.60% on the current price. It has a four-year average dividend yield of 1.51%. Its dividend payouts have increased at a CAGR of 7.9% over the past three years and 8.7% over the past five years.

XLV has gained 3.9% year-to-date and 10.7% over the past year to close the last trading session at $141.81.

XLV’s POWR Ratings reflect its promising prospects. XLV has a B grade for Buy & Hold. In the same group, it is ranked #26. Click here to access all of XLV’s POWR Ratings.

ETF #1: Vanguard Health Care Index Fund ETF Shares (VHT)

VHT is an ETF launched and managed by The Vanguard Group, Inc. The fund invests in the public equity markets of the United States, focusing on stocks of companies operating across the healthcare sector. It includes growth and value stocks of companies with diversified market capitalizations. The fund seeks to track the performance of the MSCI US Investable Market Index (IMI)/Health Care 25/50 using a full replication technique.

With $17.77 billion in AUM, the fund has a total of 414 holdings. VHT’s top holding is LLY with a 10.95% weighting, followed by UNH with an 8.23% weighting, and AbbVie, Inc. (ABBV) with 4.83%.

VHT has an expense ratio of 0.10%, lower than the category average of 0.52%. It currently has a NAV of $275.26. Its fund outflows came in at $15.90 million over the past month.

The fund’s annual dividend of $3.85 yields 1.47% on the current share price. Its four-year average yield is 1.30%. Moreover, its dividend payouts have increased at a CAGR of 7.3% over the past three years.

VHT has gained 11.8% over the past year and 3.8% year-to-date to close the last trading session at $260.20.

VHT’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of B, translating to a Strong Buy in our proprietary rating system.

It has a B grade for Buy & Hold and Trade. It is ranked #9 in the Health & Biotech ETFs group. To access all the POWR Ratings for VHT, click here.

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XLV shares were trading at $141.94 per share on Monday afternoon, up $0.10 (+0.07%). Year-to-date, XLV has gained 5.25%, versus a 24.91% rise in the benchmark S&P 500 index during the same period.

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.

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