5 Most Promising Dividend Stocks According to Analysts

2. CVS Health Corporation (NYSE:CVS)

Number of Hedge Fund Holders: 70

One-Year Average Price Estimate: $113.52

In January, CVS Health Corporation (NYSE:CVS) declared a quarterly dividend of $0.605 per share, which was bump from the previous dividend of $0.55. CVS Health Corporation (NYSE:CVS)’s one-year average price target set by analysts is $113.52, which shows a strong upside potential from current levels. At the end of the fourth quarter of 2022, 70 hedge funds out of the 943 funds had stakes in CVS Health Corporation (NYSE:CVS). The total worth of these stakes was $2.1 billion. The biggest hedge fund stakeholder of CVS Health Corporation (NYSE:CVS) was Cliff Asness’ AQR Capital Management which had a $396 million stake in the company.

Here is what Vltava Fund has to say about CVS Health Corporation (NYSE:CVS) in its Q3 2022 investor letter:

“CVS is a leader in the provision of healthcare services in the USA. It has three main businesses: an enormous network of pharmacies, a health insurance company, and “prescription benefit management”, which is a kind of intermediary between insurance companies and pharmacies. This is the result of large acquisitions over the past 15 years – most notably of Caremark (2007) and Aetna (2018). The markets had deemed its acquisition of health insurer Aetna too expensive (and we agree), so CVS stock then fell into disfavour for a few years.

We took advantage of this in the summer of 2020 and brought the stock into our portfolio at a time when its price was pressed down still further by the coronavirus pandemic. CVS is a giant. It has revenues of USD 300 billion, making it one of the largest companies in the world. It is a relatively stable and highly profitable company with strong free cash flow. Over the past few years, CVS has focused primarily on reducing debt.

This is already much lower than it had been after the Aetna acquisition, and most of the cash is now likely to go to shareholders through share buybacks or be used for smaller acquisitions to grow the company further. CVS trades at about 11 times annual earnings, which is a very appealing valuation given the expected future growth in profitability and overall modest cyclicality in its business.”