Healthcare related stocks typically provide a bit of a shelter during rocky market periods, suggests Chuck Carlson, dividend reinvestment specialist and editor of DRIP Investor.
One stock that provides an interesting play in the healthcare space is CVS Health (CVS). Most investors know CVS by its drugstores. But CVS is also a major pharmacy benefits manager (CVS Caremark) and a major insurer (Aetna).
What also will surprise most investors is the size of CVS — the firm will do roughly $325 billion in revenue in 2023. CVS provides health-care services through a variety of channels and over 300,000 employees, including more than 40,000 physicians, pharmacists, nurses, and nurse practitioners. The company’s segments include:
Pharmacy services — CVS operates more than 9,900 retail stores along with mail pharmacy and specialty pharmacy services.
Health and wellness services — CVS operates MinuteClinic and HealthHub locations, providing a variety of long-term care, infusion services, care management, and wellness and preventative services.
Health plans — Via its Aetna unit, CVS offers Medicaid and Medicare plans, as well as health plans for both commercial and specialty insurance needs.
Virtual care services — The company’s virtual care solutions include telehealth services and digital tools.
Prescription drug coverage — CVS operates one of the largest pharmacy benefit management companies in the U.S.
Despite the company’s massive size, CVS should still grow the top and bottom lines in 2023, and mid-to-high single digit growth is likely for the long term.
CVS, yielding 2.1%, offers a good total-return play for investors. After a number of years of no dividend growth, the dividend was boosted 10% in early 2022. Downside risk for the stock should be limited to the mid-$80s. I expect the stock to test its 52-week high of $111 over the next 12 months.
Please note CVS offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company. Shares may also be purchased via any brokerage firm.