After underperforming during 2024, shares of CVS Health (NYSE: CVS) to rise. From the end of 2024 to 14 February, the stock climbed 46.7% higher.
Shares of the Health Care Conglet Stock made considerable profit after the management had presented an encouraging winning report of the fourth quarter on Wednesday 12 February. Adapted income that reached $ 1.19 per share were 29% above the average estimate of Wall Street analysts that follow the company.
CVS Health Stock is a lot up, but still offers a juicy dividend yield of 4% at recent prices. Could it be a smart purchase now for income seeking investors? Below I will weigh some strengths of the company against its weaknesses to find out.
You are probably familiar with the omnipresent chain of the CFS Health of retail pharmacies, but this is a somewhat small part of the general operation of the conglomerate. The company also has a leading company for pharmacy benefits management (PBM) and Aetna, the medical insurance giant.
In itself, the healthcare -related companies of CVS Health do not offer investors to become enthusiastic about. However, bringing these activities under one roof gives the company sufficiently scale -related Cost benefits To generate relatively reliable profit.
CVS Health Stock dropped fast last year because a surprisingly high level of the use of Aetna members reduced the winnings. The ratio of Aetna of income costs as a percentage of the premiums received was a very healthy 84.2% in 2019. That figure fell at the start of the pandemic but shot to 92.5% last year.
Rising health care costs are not a new phenomenon. CVS Health will pass on the increasing costs to its customers by increasing premiums. As a leading employer of care providers, CFS Health also enjoys considerably more control over rising healthcare costs than the smaller colleagues.
The income has fallen, but are still strong enough to comply with the dividend obligation of CVS Health. Management expects adjusted income for 2025 to countries in a reach between $ 5.75 and $ 6 per share. That is enough to support a dividend that only $ 2.66 per share has been established annually and to reduce the company’s debt tax.
Despite the pause of annual dividend benefit, a few years has been increased to support the Aetna acquisition, CVS Health has increased its dividend payment by 90% in recent decade. By using a combination of cost checks and rising premiums, AETNA can reduce his medical benefit ratio again in another year or two. This can lead to large dividend payment in the coming years.