Tag Archives: NYSE:CVS

Do Quality Shares Lead to Lower Returns for Your Portfolio?

Managing your own stock portfolio is not easy. One of the many important decisions is choosing between quality and returns. Is there a cost in investing in high-quality shares? Could buying them lead to lower returns?

There’s no simple answer. However, your rate of return on a stock depends largely on the valuation you paid and the growth rate of the company. Besides, there are other considerations outside of aiming for high returns.

Let’s explore the answers with examples, including Microsoft Corporation (NASDAQ:MSFT), The Coca-Cola Co (NYSE:KO).

Quality companies tend to trade at premiums

Some say you can get quality and returns too. The rationale being that when you buy quality companies, their steadily rising earnings will lead to steadily rising share prices. However, if you overpay for them, the expected returns will likely be unsatisfactory. Read More

Retire Early With These 3 High-Growth Stocks

Buying high-growth stocks can double your money faster. And now’s your opportunity to buy three such stocks at great valuations.

Since the stock market returns 10% (inflation included) on average, I consider high-growth stocks as companies which are expected to grow their earnings by more than 10% a year.

High-growth healthcare stock

CVS Health Corp (NYSE:CVS) was founded in 1963. It is one of the largest pharmacy benefit managers in the United States with nearly 80 million plan members.

CVS logo

Additionally, CVS is diversified by its more than 9,600 retail pharmacies, more than 1,100 walk-in medical clinics, and dedicated senior pharmacy care business which serves over one million patients a year.

After hitting an all-time high of US$112 per share and an outrageous price-to-earnings ratio (P/E) of about 23 in July 2015, CVS’s shares are finally trading at a decent valuation. It trades at a P/E of 15.3 at about US$87 per share.

Although CVS only yields 1.9%, it can continue growing its dividend per share (DPS) at a double-digit rate like it has for the last 11 consecutive years.

Its payout ratio is only 29% and coupled with growing earnings, its dividend is very safe. Analysts expect it to grow its earnings per share (EPS) by 12.2-14.4% per year in the next three to five years. Read More

Top 10 Consumer Staples: Are There Any Worthy Buys? Part 4

In the last 12 months, the Consumer Staples ETF (NYSEARCA:XLP) has outperformed the SPDR S&P 500 Trust ETF (NYSEARCA:SPY). The SPY has risen 3.6%, while the XLP has appreciated 8.5%. Over longer periods, the XLP has tended to be market perform or market outperform while offering a higher yield.

Now that the Consumer Staples sector as a whole has outperformed the market recently, it may be time to consider taking some profits or simply do nothing and collect the dividends.

Investors planning to make new investments in this sector should be extra careful about valuation and determine how much they’re willing to pay.

Procter & Gamble Co (NYSE:PG), The Coca-Cola Co (NYSE:KO), and PepsiCo, Inc. (NYSE:PEP) trade at relatively expensive multiples compared with their historical trading levels. Although the companies still pay solid dividends at yields of about 3%, investors can probably find better opportunities for total returns in new investments.

For example, Philip Morris International Inc. (NYSE:PM) and Altria Group Inc (NYSE:MO) trade at similar multiples to PG, KO, and PEP but offer higher yields with better growth prospects — albeit not an apple to apple comparison.

CVS Health Corp (NYSE:CVS) benefits from an aging population in the U.S. Further, CVS trades at a reasonable multiple of 17.5, making it one of the better opportunities to explore for total returns in the double-digits if investors don’t need immediate income.

The above is an excerpt from my Seeking Alpha article. So, to learn more about earnings estimates and dividend information of each company, check out the article here: Top 10 Consumer Staples: Are There Any Worthy Buys? Part 4

This is a part of a series covering the top stocks in each sector:

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Disclosure: At the time of writing, I own shares in AAPL, AMGN, FB, NKE, and SBUX.

Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.

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