Tag Archives: NYSE:CVS

CVS Health: Dividend Stock Still a Strong Buy

CVS Health (NYSE:CVS) was substantially undervalued before the 7% pop on Wednesday. It remains a strong buy for long-term investors.

Why the Pop?

CVS reported its Q2 results on Wednesday. And the stock appreciated 7% because the business performed better than expected with the company beating its own Q2 adjusted earnings per share (“EPS”) guidance by 10%. As a result, it also boosted its full-year guidance modestly by about 1.8% to $6.89-7.00.

Additionally, the Aetna integration and debt reduction have been progressing well.

Q2 Results

Adjusted revenues increased 36% to $63.4 billion, adjusted operating income rising 55% to $4 billion, adjusted EPS rising 12% to $1.89, and cash flow from operations climbing 82% to $5.3 billion. The large spike in revenues and operating income is attributable to the Aetna acquisition, which was closed on November 28, 2018.

The Leveraged Balance Sheet

The Aetna acquisition resulted in CVS’s leveraged balance sheet. At the end of Q2, CVS’s net debt arrived at $61.3 billion, leading to a D/E of 99.6% and a debt-to-assets ratio of 28%.

Read More

How to Build a Position in Your Favorite Stocks

This article with an additional example using Tencent (OTCMKTS:TCEHY) first appeared in the Seeking Alpha Marketplace service DGI Across North America.

Have you ever missed out on high-flying winners? Have you ever been stuck in a (seemingly) losing stock for a long time? I’ll use Amazon.com (NASDAQ:AMZN) and CVS Health (NYSE:CVS) as examples for illustration.

person with a question

How to Build a Position in Your Favorite High-Flying Winner

An investment in Amazon 10 years ago has become a 24-bagger. In other words, it delivered returns of roughly 37.5% per year. That said, we’ve been in a bull market since 2009.

In a correction, it’s possible that Amazon stock could fall 30-50%. In a normal market though, one of the best ways to build a position in a high-flying stock like Amazon is buying it periodically.

Some investors wait to buy stocks on dips. However, you’ll notice that in the last few years, dips in Amazon stock didn’t occur very often.

chart showing dips of Amazon stock between 2016 and 2018

Source: Google Finance with author annotation – Potential buy points when using the “buying on dips” strategy

If you waited for a dip in Amazon stock in June 2017, you wouldn’t have gotten one until April 2018. However, by then, the stock had already appreciated +40%.

At this point in the cycle, I’m leaning more towards buying high-flying stocks on a correction, whenever it may occur. Share in the comments below if you have a different opinion.

Read More

3 Reasons CVS Health Corp is a Good Company

If you have been a shareholder of CVS Health Corp (NYSE:CVS) in the last few years, it might have been a scary ride in the last two. I hope this article will be useful for shareholders and for people who are considering to invest in CVS today.

Why? This article reflects on my Seeking Alpha article and the investment community comments which followed.

CVS Health continues to grow its dividend

For the last 13 years, CVS Health has never once disappointed dividend-growth investors. In fact, last week, the company just announced another 17.6% dividend increase for 2017.

CVS Health logo

This is good news in the midst of management’s estimations of flat bottom line growth for next year, in which it expects net revenue growth of 4-5.75%, adjusted earnings-per-share (EPS) growth of -0.5% to 2.5%, and free cash flow decline of 7-13%.

Do not worry. I believe the company should be able to maintain its dividend growth streak. (Don’t laugh. I’ve seen a company that has raised its dividend and only to cut it soon after.)

Although CVS Health’s earnings are expected to remain flat on a per-share basis, its payout ratio for next year is expected to be less than 35% and very sustainable.

Read More