UnitedHealth Group’s (NYSE:UNH) stock price has declined roughly 10% since its all-time high in early January. The stock is down year-to-date as well. But this dividend growth stock has ranked highly for over 1 year in my Dividend Power ranking model that emphasizes dividend growth and safety. To put this in context, the trailing 10-year dividend growth rate is 28.14% CAGR and trailing 5-year dividend growth rate is 20.83% CAGR. The payout ratio is only about 27.5%. I will talk more about dividend safety below. You can plainly see though, why I like UnitedHealth as a dividend growth stock. Granted, the yield is only near the market average, but the high dividend growth rate, dividend safety, market leadership, and reasonable valuation make up for it. I view the UnitedHealth, the giant health insurer, as a long-term buy.
Overview of UnitedHealth – The Giant Health Insurer
UnitedHealth traces its founding back to 1974. Today, the company operates in four segments: UnitedHealthcare, OptumRx, OptumHealth, and OptumInsight. The company is now the largest private health insurer in the U.S. (UnitedHealth), the third largest pharmacy benefits company (OptumRx), a healthcare services provider (OptumHealth), and offers analytics (OptumInsight). UnitedHealth provides medical benefits to over 50 million members through employer-sponsored, self-directed, and government-backed insurance plans in the U.S. and internationally. As the market leader UnitedHealth has the No. 1 or No. 2 position in 31 States. It’s closest competitor, Anthem, Inc. (ANTM), is No. 1 or No. 2 in only 9 States. UnitedHealth also offers health IT services, data analytics and research, health consulting, outsourcing, software, and pharmacy benefits. Total revenue was $257B in 2020.
UnitedHealth Revenue Growth and Margins
UnitedHealth grows both organically and through M&A. The insurer is very acquisitive and has added members and scale through acquisitions. UnitedHealth’s acquisitions in the past decade include Catamaran for $12.8B in 2015, DaVita Medical Group for $4.3B in 2019, Equian for $3.2B in 2019, as well as several smaller firms…
Disclosure: Long UNH
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