5 AWESOME biotechs that pay healthy dividends

Are these 5 biotechs entering the BUY ZONE?

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There's no doubt that the healthcare sector has a clear history of outperforming the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). Biotechnology stocks are a subsection of the healthcare industry and can provide particularly impressive returns if you buy the right company at the right time.

Many have the impression that all biotechs are speculative, but that's far from the case. Indeed, Cochlear Limited (ASX: COH) is a biotechnology company that makes hearing implants and has just launched its latest product, the Nucleus 6. Cochlear detractors tend to forget that the company has historically been ahead of the game. For example, the Nucleus 6 offers the industry's first automated auditory scene classifier which overcomes the need for users to change the settings on their hearing aid when the sound environment changes. I've noticed the number of Cochlear shares sold short is reducing (slowly) so it may be the market sentiment around the company is improving: shares are up 4.5% in the last month alone. Cohclear yields 4.2% – a very healthy dividend for a blue-chip stock.

Another well-established biotech I like is ResMed Inc. (CHESS) (ASX: RMD), which makes machines for the treatment of sleep apnoea. Not only will the ageing population and obesity epidemic drive demand for ResMed's products, but the trend towards home testing for sleep apnoea will also assist. On top of that, America has recently improved its healthcare system, so the chances of improving sales over there are good.

One of ResMed's main competitors is NZ giant Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) (NZX: FPH). It has challenged ResMed by releasing a quieter mask, the PilairoQ. However, Fisher & Paykel is a far more diversified company than ResMed – its products extend far beyond treatments for obstructive sleep apnea. Whereas ResMed has a cash hoard of over $1 billion, Fisher & Paykel has net debt of over $90 million. I think that puts ResMed in a much stronger position.

One of my preferred ways to profit from the biotech industry is Cryosite Limited (ASX: CTE). Cryosite offers cryogenic storage to companies that are undertaking clinical trials. In that sense it profits from the volume of trials conducted in Australia, rather than the outcome of the trials themselves. If Tony Abbott's medical research slush fund does get up, it will almost certainly benefit Cryosite. Significant reinvestment into the business has disguised Cryosite's strong cashflow, and I expect the market will wake up to the value in due course. At current prices the stock yields over 3.5%.

It's also worth mentioning Acrux Limited (ASX: ACR) a company that sells Axiron, an underarm spray used to boost testosterone in men. The company has seen its share price nosedive 76% in the last year, as sales have been hit hard due to concerns about the health risks of the treatment. While I lack the psychology for hardcore contrarian investing, I can't help feeling that in a couple of years fears will fade and the testosterone booster will once again be in vogue.

Motley Fool contributor Claude Walker (@claudedwalker) owns shares in Cryosite Limted.

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