The company announced that it is raising its quarterly dividend by 17.60% to 50 cents/share. This is the fourteenth consecutive annual dividend increase for this dividend achiever. In addition, with a new $15 billion share repurchase authorization, the company now has more than $18 billion authorized to be used for share repurchases over the next few years.
Over the past decade, the company has managed to boost dividends at a rate of 25.40%/year. This is some impressive dividend growth out there for CVS Health shareholders. However, I would expect that this rate of annual dividend growth to slow down a little over the next decade. If CVS Health managed to grow dividends at a rate of 10%/year, supported by strong earnings growth from here, I would be a happy camper.
This was supported by a solid 12.30% average increase in annual EPS over the past decade, and a low payout ratio. I analyzed the company in November, and initiated a position around that time. Please check my analysis of CVS Health for more information about the company.
Currently, CVS is attractively valued at 16.40 times forward earnings and a yield of 2.50%. I took advantage of the huge sell-off last month and initiated a small new position in the stock. Given the rapid increase in dividends, I think that the stock is a good value today.
Full Disclosure: Long CVS and WBA
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