Understanding the Dividend Performance and Sustainability of CVS Health Corp
CVS Health Corp (CVS, Financial) recently announced a dividend of $0.61 per share, payable on 2023-11-01, with the ex-dividend date set for 2023-10-19. As investors anticipate this upcoming payment, it's vital to examine the company's dividend history, yield, and growth rates. Using data from GuruFocus, we delve into CVS Health Corp's dividend performance and sustainability.
What Does CVS Health Corp Do?
CVS Health Corp offers a diverse range of healthcare services. The company operates over 9,000 retail pharmacy stores primarily in the U.S. It is also the largest pharmacy benefit manager, processing over 2 billion adjusted claims annually. Furthermore, CVS Health Corp operates a top-tier health insurer, serving about 26 million medical members. The recent acquisition of Oak Street adds primary care services to the company's portfolio, potentially creating significant synergies with its existing business lines.
A Glimpse at CVS Health Corp's Dividend History
Since 1986, CVS Health Corp has consistently paid dividends, currently distributed on a quarterly basis. The company has increased its dividend each year since 1997, earning it the title of a dividend aristocrat. This distinction is given to companies that have increased their dividend each year for at least the past 26 years.
Breaking Down CVS Health Corp's Dividend Yield and Growth
As of today, CVS Health Corp boasts a 12-month trailing dividend yield of 3.29% and a 12-month forward dividend yield of 3.37%. This implies an expectation of increased dividend payments over the next 12 months.
Over the past three years, CVS Health Corp's annual dividend growth rate was 3.20%. However, this rate decreased to 1.40% per year over a five-year horizon. Despite this decrease, CVS Health Corp's annual dividends per share growth rate over the past decade stands at an impressive 11.50%.
Based on CVS Health Corp's dividend yield and five-year growth rate, the 5-year yield on cost of CVS Health Corp stock as of today is approximately 3.53%.
The Sustainability Question: Payout Ratio and Profitability
The sustainability of a dividend can be assessed by evaluating the company's payout ratio. The dividend payout ratio indicates the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, ensuring funds for future growth and unexpected downturns. As of 2023-06-30, CVS Health Corp's dividend payout ratio is 1.05, which may suggest that the company's dividend may not be sustainable.
CVS Health Corp's profitability rank provides insights into the company's earnings prowess relative to its peers. As of 2023-06-30, CVS Health Corp's profitability ranks 7 out of 10, indicating good profitability prospects. The company has reported net profit in 9 out of the past 10 years.
Growth Metrics: The Future Outlook
For dividends to be sustainable, a company must demonstrate robust growth metrics. CVS Health Corp's growth rank of 7 out of 10 suggests a good growth trajectory relative to its competitors.
CVS Health Corp's revenue per share and 3-year revenue growth rate indicate a strong revenue model. However, the company's revenue has increased by approximately 7.40% per year on average, a rate that underperforms approximately 77.78% of global competitors.
The company's 3-year EPS growth rate reveals its ability to grow earnings, a critical component for sustaining dividends in the long run. During the past three years, CVS Health Corp's earnings increased by approximately -14.80% per year on average, a rate that underperforms approximately 62.5% of global competitors.
Conclusion
While CVS Health Corp has a commendable history of consistent and growing dividend payments, the current payout ratio raises concerns about the sustainability of future dividends. However, the company's profitability rank and growth metrics suggest promising prospects. Investors should closely monitor the company's performance and consider these factors when making investment decisions.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
