Key Points

• President Trump's tariffs could erode healthcare companies' profits, but some may perform well regardless.

• Eli Lilly and Novartis have taken steps to mitigate the potential impact.

• Both drugmakers are innovative, deliver strong financial results, and have excellent dividends.

• 10 stocks we like better than Eli Lilly ›

President Donald Trump's trade policies have caused tumult on Wall Street. The president has pushed for aggressive tariffs on imported goods in an attempt to bring manufacturing jobs back to the country.

Although there were hopes that certain sectors would be spared -- including healthcare -- it turns out that won't be the case. Higher duties on imports could increase companies' costs, which would squeeze their margins and bottom lines, and meaningfully hurt their stock performance. However, even with this threat, there are still some healthcare companies worth investing in, including Eli Lilly (NYSE: LLY) and Novartis (NYSE: NVS).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

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1. Eli Lilly

Eli Lilly has been expanding its U.S.-based manufacturing capacity for years, but it has recently accelerated this effort. The pharmaceutical leader has now invested, or committed to invest, $50 billion to build or update manufacturing sites in the country since 2020, about half of which it announced during the first quarter.

According to management, once it completes its ongoing projects, it will be able to manufacture 100% of medicines aimed at U.S. patients within the country while also increasing its exports. In other words, the drugmaker will be mostly insulated from the impact of Trump's tariffs.

And there are other reasons to invest in Eli Lilly. Here are three:

First, the company has demonstrated remarkable innovation in its core areas of diabetes and obesity in recent years. Its newer launches, Mounjaro and Zepbound, are already generating billions and allowing it to grow its revenue and earnings at a good rate.

In the first quarter, its top line rose 45% year over year to $12.7 billion. Net income was $2.8 billion, 23% higher than the year-ago period. Results like these should be the norm in the next five years at least.

Second, the company has an extensive pipeline. Lilly recently reported positive phase 3 results for an oral GLP-1 candidate, orforglipron. This was an important win for the company since its current GLP-1 medicines are administered subcutaneously, so orforglipron could attract some patients who want a more convenient option. And there are many other exciting candidates, even beyond diabetes and obesity care.

Third, the company is an excellent dividend stock, despite its unimpressive forward yield of 0.8%. It has increased its payout by 102.7% in the past five years. But whether you seek growth or income, Eli Lilly is a top stock to buy now and hold for a long time, despite the threat of tariffs.

2. Novartis

Novartis is following a similar blueprint to mitigate the impact of tariffs. The company announced it would invest $23 billion in the next five years to improve its U.S.-based manufacturing footprint.

Although its results may suffer somewhat from the impact of tariffs in the meantime, the company should eventually be able to handle them, assuming the tariffs continue. It's another excellent healthcare stock to consider in this environment, particularly given its strong financial results and promising prospects.

In the first quarter, net sales increased by 12% to $13.2 billion year over year. Net income was $4.5 billion, 22% higher than the year-ago period.

Some might point out that Novartis is losing U.S. patent exclusivity for its heart failure medicine Entresto this year. In the first quarter, it was still its top-selling drug, generating $2.3 billion in sales, 20% higher than the prior-year quarter.

This will be a significant loss, but management has prepared for it. Newer medicines should eventually replace Entresto, including Fabhalta, which treats paroxysmal nocturnal hemoglobinuria (a rare blood disease), and cancer drugs Scemblix and Pluvicto.

All of them first earned approval in the U.S. between 2021 and 2023. In the first quarter, Pluvicto, the best-selling of the trio, generated revenue of $371 million, a 20% year-over-year increase. Furthermore, Novartis' deep pipeline will lead to even more launches. The company currently has over 100 ongoing programs.

Lastly, Novartis is also a strong income stock. The drugmaker has increased its dividend for 28 consecutive years and currently offers a forward yield of 3.3%, significantly higher than the S&P 500's average yield of 1.3%.

It should deliver solid returns for patient investors, despite an upcoming major patent cliff and potential impacts from tariffs.

Should you invest $1,000 in Eli Lilly right now?

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Prosper Junior Bakiny has positions in Eli Lilly. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Key Points

• SCHD and GCOW focus on higher-yielding dividend stocks.

• The ETFs have different strategies for selecting those stocks.

• They also have different fees and return profiles.

Many exchange-traded funds (ETFs) focus on holding dividend-paying stocks. While that gives income-seeking investors lots of options, it can make it difficult to know which is the best one to buy.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) and Pacer Global Cash Cows Dividend ETF (NYSEMKT: GCOW) are two notable dividend ETFs. Here's a look at which is the better one to buy for those seeking to generate passive income.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

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Different strategies for selecting high-yielding dividend stocks

The Schwab U.S. Dividend Equity ETF and the Pacer Global Cash Cows Dividend ETF aim to provide their investors with above-average dividend income by holding higher-yielding dividend stocks. The ETFs each hold roughly 100 dividend stocks. However, they use different strategies to select their holdings.

The Schwab U.S. Dividend Equity ETF aims to track the returns of the Dow Jones U.S. Dividend 100 Index. That index screens U.S. dividend stocks based on four quality characteristics:

• Cash flow to debt.
• Return on equity (ROE).
• Indicated dividend yield.
• Five-year dividend growth rate.

The index selects companies that have stronger financial profiles than their peers. That should enable them to deliver sustainable and growing dividends, and the Schwab U.S. Dividend ETF accordingly provides investors with a higher-yielding current dividend that should grow at an above-average rate. At its annual reconstitution, its 100 holdings had an average dividend yield of 3.8% and a five-year dividend growth rate of 8.4%.

The Pacer Global Cash Cows Dividend ETF uses a different strategy for selecting its 100 high-yielding dividend stocks. It starts by screening the 1,000 stocks in the FTSE Developed Large-Cap Index for the 300 companies with the highest free cash flow yield over the past 12 months. It screens those stocks for the 100 highest dividend yields. It then weights those 100 companies in the fund from highest yield to lowest, capping its top holding at 2%. At its last rebalance, which it does twice a year, its 100 holdings had an average free cash flow yield of 6.3% and a dividend yield of 5%.

Here's a look at how the top holdings of these ETFs currently compare:

Data sources: Schwab and Pacer.

Given their different strategies for selecting dividend stocks, the funds have very different holdings. SCHD holds only companies with headquarters in the U.S., while GCOW takes a global approach. U.S. stocks make up less than 25% of its holdings. Meanwhile, SCHD weights its holdings based on their dividend quality, while GCOW weights them based on dividend yield. Given its focus on yield, GCOW offers investors a higher current income yield at 4.2%, compared with 3.9% for SCHD.

Costs and returns

While SCHD and GCOW focus on higher-yielding dividend stocks, their strategies in selecting holdings have a major impact beyond the current dividend income. Because SCHD is a passively managed ETF while GCOW is an actively managed fund, SCHD has a much lower ETF expense ratio than GCOW. SCHD's is just 0.06%, compared with GCOW's 0.6%. Put another way, every $10,000 invested would incur $60 in management fees each year if invested in GCOW, compared with only $6 in SCHD.

GCOW's higher fee really eats into the income the fund generates, which affects its returns over the long term. The fund's current holdings actually have a 4.7% dividend yield, whereas the fund's latest payout had only a 4.2% implied yield.

Data sources: Pacer and Schwab. Note: GCOW's inception date is 2/22/16, while SCHD's is 10/20/11.

GCOW has outperformed SCHD over the past five years. However, SCHD has delivered better performance over the longer term. That's due to its lower costs and focus on companies that grow their dividends, which tend to produce the highest total returns over the long term.

SCHD is a better ETF for passive income

SCHD and GCOW hold higher-yielding dividend stocks, making either ETF ideal for those seeking passive income. However, SCHD stands out as the better one to buy because of its focus on dividend sustainability and growth. It also has a much lower ETF expense ratio. So it should provide investors with an attractive and growing stream of passive dividend income.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

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*Stock Advisor returns as of June 30, 2025

Matt DiLallo has positions in Chevron, Coca-Cola, ConocoPhillips, Gilead Sciences, Schwab U.S. Dividend Equity ETF, and Verizon Communications. The Motley Fool has positions in and recommends Amgen, Chevron, Cisco Systems, Gilead Sciences, and Texas Instruments. The Motley Fool recommends BP, British American Tobacco, Equinor Asa, Lockheed Martin, Nestlé, Philip Morris International, and Verizon Communications and recommends the following options: long January 2026 $40 calls on British American Tobacco and short January 2026 $40 puts on British American Tobacco. The Motley Fool has a disclosure policy.

President Donald Trump's macroeconomic policies are taking center stage on Wall Street. The 47th U.S. president has decided to implement aggressive tariffs on imported goods from most countries, although he recently paused these plans for 90 days. Regardless, corporations are looking for ways to avoid paying these tariffs.

That includes two pharmaceutical leaders: Johnson & Johnson (NYSE: JNJ) and Novartis (NYSE: NVS). The industry has so far escaped Trump's tariffs, but that might not last for much longer, which makes these drugmakers' plans critical to monitor. Should investors still consider purchasing shares of Johnson & Johnson and Novartis in this environment?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

1. Johnson & Johnson

One way to avoid tariffs is to manufacture locally. That's what Johnson & Johnson plans on doing more of. The healthcare giant had already been shoring up its manufacturing capacity in the United States, but in March, it announced it would increase these investments. It plans to spend over $55 billion in the U.S. over the next four years, which is 25% more than it spent in the previous four years. J&J will build new facilities and expand some existing ones.

But it will take time for the company to move more of its manufacturing back into the U.S., and in the meantime, it could feel the impact of the tariffs. That's besides other issues the drugmaker faces in the medium term. It's still dealing with thousands of talc-related lawsuits. Furthermore, with the Inflation Reduction Act (IRA), a law passed in the U.S. in 2022 that granted Medicare the power to negotiate the prices of certain drugs, Johnson & Johnson will generate lower revenue from some products.

That said, there are plenty of things to like about J&J's business. Its significant investment in the U.S. to avoid tariffs demonstrates its ability to adapt to changing economic conditions. And that adaptability is precisely what makes this corporation massively successful. No pharmaceutical company generates more in annual revenue. Considering that, it's unsurprising the pharmaceutical company has existed for more than a century. Whether it's dealing with the IRA or some other legal challenge, the smart money is on Johnson & Johnson overcoming it.

It has done so plenty of times throughout its history. The pharmaceutical leader also boasts an AAA rating from Standard & Poor's -- that's a higher credit rating than the U.S. government's. The current legal challenges won't be its undoing.

Meanwhile, it continues to generate strong financial results. Growth in revenue and earnings isn't spectacular, but is steady and reliable. J&J has a deep pipeline of investigational drugs and a diversified medical device business.

Lastly, as more evidence of a robust business, it has now increased its payouts for 63 consecutive years, making it a Dividend King. Rather than avoiding Johnson & Johnson, investors seeking reliable income payers in these volatile times should seriously consider buying its shares.

2. Novartis

Novartis is also shoring up its U.S. manufacturing footprint. The company will invest $23 billion over five years to build seven new facilities and expand three more. In the end, it expects to locally manufacture 100% of the medicines it sells in the U.S. That's all good news for shareholders, as it shows that even if Trump's tariffs outlast his administration, Novartis is well-positioned to mitigate their impact.

The drugmaker expects to grow its revenue at a compound annual growth rate (CAGR) of 5% through 2029, a decent performance for a pharmaceutical giant. Novartis will lose U.S. patent exclusivity for some major products, including heart failure medicine Entresto, this year. Entresto generated $7.8 billion in sales last year, up 30% year over year, so this will be a significant loss.

However, Novartis will eventually fill the gap thanks to newer products. Fabhalta, first approved in the U.S. in 2023 to treat a rare blood disease called paroxysmal nocturnal hemoglobinuria, could generate peak sales of $3.6 billion according to some estimates. There will be others that will allow Novartis to clock that CAGR of 5% through 2029, despite its best-selling drug going off-patent in the U.S. this year. Beyond the next four years, the company's ability to generate consistent earnings, its existing lineup, and its deep pipeline should allow the stock to perform well.

Additionally, Novartis has increased its payouts for 28 consecutive years, a strong streak that makes it attractive to income-oriented investors. Despite the threat of tariffs, I think this dividend stock is a buy.

Should you invest $1,000 in Johnson & Johnson right now?

Before you buy stock in Johnson & Johnson, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Johnson & Johnson wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $594,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $680,390!*

Now, it’s worth noting Stock Advisor’s total average return is 872% — a market-crushing outperformance compared to 160% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 21, 2025

Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.