CVS Health Corp (CVS): A Quality Dividend Growth Stock On Sale Or A Value Trap?

Conclusion

While there will always be a lot of potential political risk when it comes to any company in the healthcare industry, CVS Health has historically proven itself far more nimble and adaptable than many of its rivals over the years. Favorable demographic trends should also serve as a growth tailwind for the company.

However, at the end of the day, it’s hard for me to wrap my head around all of the changes happening across the entire healthcare value chain. From increased drug price scrutiny to reimbursement rate pressures and the potential for PBM business models to structurally change in ways that would harm CVS’s long-term profitability, there are a number of concerns bubbling up that make it difficult for me to gain conviction in CVS’s long-term growth potential (and value).

For those reasons, I am passing on CVS because it is outside of my circle of competence. I do not own the stock in our Top 20 Dividend Stocks portfolio.

With that said, CVS Health Corp (NYSE:CVS) could very well indeed be an attractive and timely opportunity for long-term dividend growth investors who are seeking potential bargains and willing to deal with a greater level of uncertainty. It’s rare to find a stock that trades for 12.5x forward earnings and has potential for double-digit earnings growth.

As Warren Buffett said, “Be fearful when others are greedy and greedy when others are fearful.” However, he also cautioned about venturing outside of one’s circle of competence.

Disclosure: None