I think the healthcare industry is one of the best ones to be in.
It has defensive earnings because people don't choose to get sick around economic cycles and are willing to pay what it takes to remain alive and well.
Healthcare also has an exciting growth future with how much the Australian population is going to age over the next two decades.
Here are three of my favourite shares to take advantage of the industry:
Japara Healthcare Ltd (ASX: JHC)
Japara is one of Australia's largest aged care providers.
I believe it's an exciting opportunity because sadly at some point the elderly can no longer function in their own home and need help in some way. A good portion of these will probably end up in an aged care facility like Japara's.
Japara alone expect to add at least 1,000 net new beds over the next few years, which should be a sizeable boost to revenue.
Japara is currently trading at 18x FY17's earnings with a grossed-up dividend yield of 7.96%.
NIB Holdings Limited (ASX: NHF)
NIB is one of the biggest private health insurers in Australia.
The business has cleverly linked with businesses like Qantas Airways Limited (ASX: QAN) to grow its number of policyholders. It has also recently announced that it will acquire GU Health.
I think NIB will continue to grow at a faster pace compared to the rest of the health insurance sector and peers like Medibank Private Ltd (ASX: MPL).
NIB is currently trading at 24x FY18's estimated earnings with a grossed-up dividend yield of 4.27%.
Healthscope Ltd (ASX: HSO)
Healthscope is Australia's second largest private hospital operator.
The number of patients who will need a hospital visit in the coming years is expected to heavily increase with the number of over-65s predicted to grow by 75% over the next two decades.
I like that Healthscope is actively adding to its capacity by increasing its number of hospital beds and operating theatres across the network.
Healthscope's share price appears to have recovered from the worst of the bad news about its medical centres and slowing growth. Hopefully management can grow the earnings per share and dividend at a good pace from now on.
Healthscope is trading at 20x FY18's estimated earnings with an unfranked dividend yield of 3.54%.
Foolish takeaway
I'm a fan of all three businesses, which is why I own shares in two of them.
At the moment I think Healthscope will probably provide the best total shareholder return over the next two to three years once the Northern Beaches Hospital is complete as it should be a big boost to earnings.
