Recent Buy: CVS Health Corp

ID-100426334-300x300 Recent Buy: CVS Health CorpI added more shares to my portfolio with the purchase of CVS Health Corp (CVS)

17 shares @ $68.00 on 11/6/2017.

This increases my forward 12-month dividend income by $34.00 to a total of $4,577.42

I also updated my portfolio page to reflect the change.

 

 

 

Even though CVS has been in the red for me with my first and second purchases, I still like the valuation and I will continue to add more to make it a full position in my portfolio.

CVS has a dividend payout ratio of 40%. This gives CVS a lot of room to continue to grow its dividend. However, because of the purchase of Aetna (AET), CVS announced that they will keep the dividend flat until leverage is down in the low 3x. I am ok with keeping the dividend flat for a few years to get the debt under controlled. After that time has passed, I see CVS continuing to grow its dividend in the double-digits as they have been doing in recent years.

 

Screen-Shot-2017-12-12-at-8.08.10-PM-1024x568 Recent Buy: CVS Health Corp

Source: CVS AET Slide Show Page 18

CVS currently has a PE of 15.4 with a forward PE of 11.5. As you can see from the graph, earnings are expected to increase for 2018 and 2019. Analysts have almost been perfect with predicting future earnings of CVS. I don’t see why that will change. 2017 earning is predicted to be $5.90 while 2018 is predicted to be $6.32. With the acquisition of Aetna, I am sure earning will be even higher.

CVS is undervalued, and I recommend it a BUY at this time. I have a fair price of $88.00 for CVS.

 

Screen-Shot-2017-12-12-at-7.32.12-PM Recent Buy: CVS Health Corp

Source: fastgraphs.com

What do you think of CVS? want to own more or do you plan to sell because of the dividend freeze?

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Comments

  1. Voyage –

    NICE purchase. Hoping they drop to a sweeter spot, around 3% yield if possible, before I add more. Again, may not get there for me, but I have my eye on them. Congrats on making an investment move though!

    -Lanny

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