We recently published a list of 12 Best Fortune 500 Dividend Stocks To Buy Right Now. In this article, we are going to take a look at where CVS Health Corporation (NYSE:CVS) stands against other best Fortune 500 dividend stocks to buy right now.
Compiled and published by Fortune Magazine, the Fortune 500 is an annual list that ranks the biggest US companies by revenue. In total, the Fortune 500 companies represent two-thirds of the US GDP with $18.8 trillion in revenues, $1.7 trillion in profits, and $43 trillion in market value (as of March 28, 2024), and they employ a workforce of 31 million around the globe.
READ ALSO: 15 Best NASDAQ Dividend Stocks to Buy
2024 proved to be a big year for large-cap stocks, as the broader US market achieved gains of nearly 25%, piggybacking on a 26% performance the year before. Large-cap stock funds, with the heaviest tilt toward growth stocks, performed the best last year, even as the market’s rally somewhat broadened from the handful of mega tech companies that have led much of the bull market.
However, the tailwinds that propelled the market to new heights are beginning to recede, as the rate of monetary policy easing slows down, long-term interests swing upward, inflation becomes sticky, and the US economy is slowing down. Moreover, the upcoming presidency of Donald Trump and his much-rumored tariffs could also herald a more volatile period for markets, as they could further fan inflation fears and put pressure on stock prices.
That said, the expected upcoming fluctuation isn’t going to be something that the mega corporations haven’t dealt with before. A 2023 report by J. P. Morgan revealed that despite the considerable volatility during the period, large-cap stocks gained around 162% between 2013 and 2023, galvanized primarily by big tech. Another 2023 report by CNBC unveiled that large US companies outperformed other investments between 2003 and 2023, with average returns of 9.3%. However, it hasn’t always been a smooth ride, as despite the stability and reliability large-cap stocks are known for, investors had to survive drops of 56.8% during the 2007-2009 bear market, 33.9% in 2020, and 25.4% in 2022.
In addition to the few tech giants regularly making headlines with their gains, large-cap dividend stocks could also be an attractive option for investors looking for a reliable, significant, and growing stream of income. According to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, the broader US large caps are expected to post an 8% increase in dividend payments in 2025, compared to the 6.4% uptick in 2024, 5.1% gains in 2023, and the 10.8% increase witnessed in 2022.
Large-cap companies tend to have more robust balance sheets compared to their smaller counterparts, enabling them to navigate through market fluctuations more smoothly while also returning value to their shareholders. Corporations in the US have continuously grown their considerable cash stockpiles since the beginning of the pandemic, thanks to the economic resilience we have witnessed recently. A report from treasury advisory firm Carfang Group revealed that as of Q1 2024, US corporations increased their cash holdings to an all-time high of $4.11 trillion, up 12.6% from the same period in 2024 and $1.28 trillion more from their pre-pandemic levels.
Methodology
To collect data for this article, we referred to the top 50 companies among the Fortune Global Rankings. Then, we picked out 12 US-listed companies with the highest dividend yields as of January 13, 2025, and ranked them by their number of hedge fund investors according to the Insider Monkey database as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A row of shelves in a retail pharmacy, demonstrating the variety of drugs and over-the-counter products.
CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 63
Dividend Yield: 5.54%
Market Cap: $64.9 billion
America’s leading health solutions company, CVS Health Corporation (NYSE:CVS) provides advanced health care from pharmacy services and health plans to health and wellness. The company operates under three segments namely Health Care Benefits, Health Services, and Pharmacy & Consumer Wellness. The idea is for CVS stores to become a one-stop shop and bring all the many parts of the healthcare chain under one roof.
CVS Health Corporation (NYSE:CVS)’s Q3 2024 reports reflect its efforts to adapt to a changing healthcare landscape. Despite significant headwinds, the company managed to increase its quarterly revenue to $95.4 billion, up 6.3% YoY and beating the analysts’ estimates by $2.74 billion. The results reflect strong performance in its Health Services and Pharmacy & Consumer Wellness segments, but the healthcare benefits business remains challenged as a consequence of continued elevated levels of utilization. As a result, CVS’ Q3 2024 operating income decreased 77.5% YoY, primarily due to a decline in the Health Care Benefits segment and restructuring charges of approximately $1.2 billion recorded in the current year.
CVS Health Corporation (NYSE:CVS) is also expected to benefit from the recent proposal of the Biden administration to significantly raise the amount that the government pays to insurers who offer Medicare Advantage plans. The Centers for Medicare & Medicaid Services intends to increase its payments to insurers that offer Medicare Advantage plans by an average of 4.3%, or over $21 billion, in 2026 compared to this year.
CVS Health Corporation (NYSE:CVS)’s stock price has surged by over 14% YTD but has declined by more than 33% since a year ago. The primary reason for this stock value erosion is the company’s Pharmacy and Consumer Wellness division, as the expected synergy from aggregating this segment to the health businesses is yet to bear fruit. The adjusted operating income of this business has plummeted from $7.26 billion in 2021 to an expected $5.70-5.75 billion in 2024. The front store revenue is expected to fall by 6.2% while the online segment continues to face tough competition from leading players like Amazon.
CVS Health (NYSE:CVS) maintained a strong cash position at the end of Q3 2024, with $6.9 billion in cash and cash equivalents. The company has consistently paid dividends to shareholders since 1997 and announced a quarterly dividend per share of $0.665 this month.
CVS Health (NYSE:CVS) ranks among the 10 Best January Dividend Stocks to Buy.
Overall, CVS ranks 8th on our list of best Fortune 500 dividend stocks to buy right now. While we acknowledge the potential for CVS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CVS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
