I 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.
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.
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.
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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