Contrarian Value Ideas

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>>> CVS Health: A unique position


https://www.fool.com/investing/2017/02/05/3-stocks-that-could-make-you-rich.aspx?source=yahoo-2&utm_campaign=article&utm_medium=feed&utm_source=yahoo-2



Investors looking for a quality business positioned to grow along with America's enormous healthcare sector will find a lot to like about this company's interesting mix of related operations. You might equate CVS Health with retail pharmacies, but its pharmacy services segment contributes nearly as much to the bottom line. The biggest operation in the segment is the pharmacy benefits management (PBM) business, which the company claims to be the nation's largest.

The PBM earns fees for helping subscribers control pharmaceutical spending. They accomplish this tricky task by negotiating with drugmakers for lower prices in return for easier patient access to their products and promoting the use of lower-cost generic options when available.

The recent acquisition of Omnicare made CVS Health a leading U.S. supplier of pharmaceutical services to assisted living and long-term care facilities. This business should fold nicely into the company's existing operations.

Combining diverse healthcare-related operations with its huge retail presence has made CVS Health consistently profitable. Investors will appreciate the company's willingness to return those profits to shareholders. Over the past five years, the company has increased its dividend payout at a 25.2% annual rate. Despite raising the dividend at a blazing pace, the company used just 19.7% of trailing free cash flow to make payments over the past twelve months. This means that the dividend is plenty safe -- and, in fact, it may even keep climbing.

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