UnitedHealth Group (NYSE:UNH) is a stock that most dividend growth investors should like. Many investors may not know about the company since it manages healthcare plans. It is not a mega-cap tech stock nor does it have a trendy product. Further, the company is not yet a Dividend King or Dividend Aristocrat. At the moment, the company has raised the dividend for 11 consecutive years. This makes the stock a Dividend Contender. This is not bad by itself. However, it is the market leading position, the dividend growth rate, and the dividend safety that make UnitedHealth stand out. I view the stock as a long-term buy.
UnitedHealth Continues to Grow
UnitedHealth is the largest private health insurer in the U.S. The company provides medical benefits to over 50 million members through employer-sponsored, self-directed, and government-backed insurance plans in the U.S. and internationally. UnitedHealth also offers health IT services, data analytics and research, health consulting, and pharmacy benefits through its Optum operating segment.
The company became the market leader through a combination of acquisitions and organic growth. In the past few years, UNH has acquired Catamaran (2015) for $12.8B in cash and DaVita Medical Group (2019) for $4.3B. These acquisitions bulked up the company’s pharmacy benefits and health care and consulting businesses respectively. These acquisitions bring more members into UnitedHealth’s plans.
UnitedHealth has also added members organically. The company has added 8.2 million more members from 2010 to 2018 through organic growth. It is now the market leader with the No. 1 or No. 2 position in 28 states. Its closest competitor, Anthem (NYSE:ANTM), is No. 1 or No. 2 in only 11 states.
By increasing members, UnitedHealth drives growth in the top and bottom lines. The company provides health benefits for a fee. From this perspective, there is only an incremental cost to adding more members…
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.