Forget Nvidia. Johnson & Johnson and 2 Other AI Stocks Are Beating the Market by 29 Points.

Healthcare is an area where AI is moving from buzzword to practical use, from drug discovery to surgery. Unlike many emerging technology plays, these are businesses built around demand unlikely to disappear. I mean, unless the human race collectively becomes immortal in the next few decades, healthcare and biotech will remain a permanent part of the economy.

That all creates an interesting opportunity. Biotech and healthcare companies use AI to make drug discovery faster, cheaper, and more precise, turning the broader AI boom into real drug pipelines, promising clinical candidates, and future blockbuster medicines.

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Add dividends to the mix, and the sector offers an interesting combination of innovation, durability, and income – all without having to look in the usual corners of the AI trade.

So let’s look at the top AI-linked healthcare and biotech companies that offer income investors dividends and growth – the best of both worlds.

How I Came Up With These Stocks

Using Barchart’s Stock Screener, I selected the following filters to get my list:

Screenshot courtesy of: www.barchart.com

YTD Performance Difference From Market: Stocks must have beaten the S&P 500 by at least 1%, so I set this to greater than 1%.
Annual Dividend Yield % (FWD): 1% yield or higher.
Number of Analysts: 12 or more. More analyst coverage gives the consensus a stronger case.
Current Analyst Rating: Set to Moderate to Strong Buy, narrowing down the results to companies that are expected to perform well in the next 12 months.
Investing Ideas: Biotechnology stocks.

The screen resulted in five companies, which I arranged from highest to lowest outperformance vs. the S&P 500.

Starting off this list is:

Merck & Company (MRK)

Merck & Company is a biopharma that develops medicines and vaccines for a wide range of diseases. It’s also the name behind Keytruda, a well-recognized cancer treatment that has recently been in the news. The company is also expanding AI through a Google Cloud partnership to support research, manufacturing, and its business operations.

That push into innovation has also been accompanied by strong stock performance. MRK stock is up 42% year to date, outperforming the S&P 500 by about 29 percentage points – the widest gap in this list.

To sweeten the deal, Merck & Company also pays a forward annual dividend of $3.40, translating to a yield of approximately 2.17%.

And lastly, a consensus among 28 analysts rates the stock a “Moderate Buy”, with its high target price suggesting decent upside over the next year.

Amgen Inc (AMGN)

The next company is Amgen, another biotech that develops medicines for various diseases, with a strong focus on cancer. Its link to AI is working with NVIDIA’s tech to predict protein properties and design biologics with improved characteristics, all to speed up drug discovery.

AMGN stock is up 34% year-to-date, beating the market by around 21 percentage points.

The icing on the cake is that the company pays $10.08 per share annually, which translates to a yield of about 2.3%.

A consensus among 35 analysts rates AMGN a “Moderate Buy,” though it’s already trading close to its high target price. Perhaps that’s why it’s the lowest-scored stock on this list, though remember that analyst high target prices aren’t always a guarantee. Who knows? With Amgen’s momentum, that high target price may need a little updating.

Johnson & Johnson (JNJ)

Last but not least is Johnson & Johnson, likely the most familiar name among the three. Today, it focuses on innovative medicines and medical technology, with AI initiatives such as the Polyphonic AI Fund for Surgery that supports technologies designed to optimize workflow in the operating room.

Johnson & Johnson stock is up 28% since the year started, outperforming the S&P 500 by 15 percentage points.

On top of that, it pays an annual dividend of $5.36 per share, translating to a yield of about 2%.

Finally, a consensus among 24 analysts rates JNJ stock a “Moderate Buy,” with the high target price suggesting a modest 15% upside over the next year.

Final Thoughts

Businesses come and go, but healthcare companies remain because they serve a market that never ceases to exist. As quiet as they may be, many of these companies have also outperformed the broader market while paying steady dividends along the way.

For income-focused investors looking for exposure to both healthcare and the AI boom, Merck & Company, Amgen, and Johnson & Johnson are worth a closer look today.

On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com

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