Bert’s Recent Buy – CVS Health Corp (CVS)

The purchase shouldn’t surprise too many of you.  Often times, Lanny will find a great dividend growth stock on a discount and sell me on the fact that the company is a buy.  Well, this time was definitely one of those instances and I followed his lead in purchasing shares in this dividend growth stock.  Time to see why I purchased shares in CVS Health Corp (CVS).

Perfectly timed picture for this post. The day I made the purchase, I happened to be driving past my local CVS store.  What are the odds?   Last week, I added 13.8123 shares of CVS  with a cost basis of $1,075.   The trade was made using the automatic trade feature on Capital One Investing, so the cost per the trade was on $3.95 and I was allowed to purchase fractional shares of stock.  One of the many reasons why I love Capital One Investing as my trading platform.  In total, this purchase added $6.90 to my quarterly dividend income figure and will add $27.62 to my annual dividend income total.  I know I have some work to do to reach my goal of $6,250 by December 31, 2017 after performing my Q1 goals review, so this is a small step in the right direction here.

In Lanny’s purchase summary that was published last week, Lanny gave an excellent summary of the metrics, the results of our stock screener, and some other items about CVS.  So I am not going to repeat each metric.  Rather, I will discuss the reasons why I purchased CVS.

  • The company passed all three metrics of our dividend stock screener.  Particularly, I love the 34% payout ratio that provides the company plenty of room to continue to growth their dividend and extend their streak of 14 consecutive annual dividend increases.
    I love the fact that their current dividend yield over 100 basis points greater than their 5 year average dividend yield.  That indicates that the company undervalued, has had some crazy dividend increases…or both.  In the case of CVS, I think it was a healthy combination of both.
  • The company represents a new sector in my portfolio.  I have exposure to healthcare through my positions in Pfizer and Cardinal Health; however, CVS represents the first retail healthcare company in my portfolio.  It is always nice to continue to diversify your portfolio every chance you get.

  • CVS pays a dividend in the second quarter of each quarter.  This purchase will continue to build income in an “off month” in the quarter, which is a nice side benefit with the purchase.  Income is income, I know, so the month doesn’t matter too much.  But it is nice to add to a month with less income when the right opportunity arises.
  • I am a big fan of the company’s move last year to acquire  Target’s pharmacy and clinic businesses.  The acquisition should add to the long term value of the company, as CVS found a way new way to connect and serve customers outside of their traditional storefront format.
  • I was able to capture this purchase before the ex-dividend date in April, so I will be receiving my first dividend check in a few short weeks.  A pretty fast turnaround if you ask me!

Bottom line, the metrics just checked out for this purchase and made too much sense to pass up on and look elsewhere for “discounts” in this crazy market.  I was in the right place, at the right time, with a decent amount of cash on hand.  Luckily, Lanny did the leg work for me with this purchase.  Thanks Lanny!  His purchase article had five great reasons to buy the company and after that, I was sold.   This breaks my recent trend of adding to positions to create large positions in my portfolio.  And trust me, this most likely won’t be my last purchase of CVS and I will look to add to my stake in the coming months to build a nice sized  position. My goal is to receive at least 1 share annually of CVS via DRIP, so it looks like I will have a few more purchases in the future!

What are your thoughts on my purchase of CVS Health?  Would you have investing in Walgreens instead? Or even a different dividend stock?  Do you own shares in CVS?

Bert

Facebooktwittergoogle_plusredditpinterestlinkedinmail

22 thoughts on “Bert’s Recent Buy – CVS Health Corp (CVS)

  1. Sounds like a solid buy indeed. We also had our eyes on this one, but lately didn’t have the time really to investigate as much. So didn’t end up buying it (yet). The outlines which Lanny set up really helps in this kind of situations!

    • Thanks Divnomics. You should hold off until you have done your research and are a comfortable with the company you are buying. AS you said, that is why it was nice that Lanny did the heavy lifting for me and allowed me to reduce my research time and make a faster decision.

      Bert

  2. Thanks for bringing CVS to my attention and your reason for buying. I’m still not in the traditional retail space but can understand why this buy was made. I never looked at CVS before so even though it’s a widely known company I am very unfamiliar with their fiances. Bottom line, nice to see the buying continue. While reading about some sales among our peers it’s comforting to know that I’m not the only crazy one still making fresh buys. Thanks for sharing.

    • Thanks Divhut. To me, this isn’t just a retail company such as JCP, Sears, etc. Their primarcy business revolves around healthcare, one of the fastest growing industries out there. Always happy to find discounts in the market and it looks like MR. Market keeps presenting us with some new buying opportunities recently. Let’s keep the buying streak alive!

      Bert

  3. Nice pickup, I was looking into Jean Coutu awhile back its a Canadian pharmacy. I think its a great space to be invested in. The baby boomers are all getting to that age and pharmacies will benefit from it. Nice to get in before the x dividend date too!

    • I was pumped that I could sneak in a quarterly dividend PCI. Made the investment that much sweeter haha Pharm will be a huge part of the economy going forward and I would imagine that it is going to be central in whatever new healthcare plan will eventually be implemented here.

      Bert

  4. Feel like I have read this same post about 5 times this week lol jk. For good reason, CVS is a great buy and many DGI members are jumping on board. Seems like the healthcare sector in general has been getting hit pretty hard lately and it’s finally time to capitalize on it! Picked up some CAH myself the other day. It was between CAH, JNJ, or CVS. Smart on your part to not only diversity by getting more healthcare, you are further diversifying the sector itself by adding retail to it.

    • JNJ was my choice a while back, have a full position now though. I’m not too familiar with CAH, avoid CVS, and really like the ETF approach to healthcare, e.g. RYH. Never know what biotech/pharma’s going to jump ahead of the others – that question is permanently in my “too hard” pile.

    • Haha That’s hilarious. Looks like a lot of people are scooping up CVS similar to we are. One of my last purchases was CAH and I have a decently large position in the company, so I am a huge fan of them. I am even considering adding more if the price remains at its current levels. JNJ is always the crown jewel, but I would like to see the price fall a little more. God I wish I could just continue to add all three!

      Bert

  5. I’m really anti-debt these days, and CVS has plenty of it, especially factoring in their off-balance-sheet leases. Just off the top of my head – would not be surprised to see Amazon enter the mail order pharmacy business, which would wreak havoc in the sector. All told, you have some margin of safety at these prices, and CVS is a good growth story. Love healthcare, hate retail. Lukewarm CVS overall, wouldn’t buy myself.

    • That’s fair Master Duke. I hate debt and have been burned by large debt balances in the past. We all remember the negative impact that debt had on KMI and BBL a few years ago and how their dividend went flying out the door. That being said, the debt levels are not unmanagable in my opinion and this is where a lower payout ratio is key. I would be concerned with high debt levels if the payout ratio were close to 100%. But here, the company’s payout ratio is still relatively low. So if they do need to pay down more debt in the future, the dividend won’t be the first source of funds like it was for KMI.

      Thanks for the great comment!

  6. Big fan of CVS, I picked up when it dropped below $70 last time and looking for another entry point to double my position. People are keep saying retail is dead. CVS, COST are those exceptions, even AMZN is building up Brick and Mortar.

    • Great buy under $70 D4S. That must be looking pretty sweet right about now. I don’t think retail is dead, by any stretch of the means. Rather, it is finding itself and figuring out how to survive in the new online environment. Companies like COST, CVS, WMT, TGT,and so many others, will be fine because they can offer some unique item/experience you cannot have online. The industry is gong through growing pains, and the companies that I mentioned are feeling some slight pain from the impact of online retail, but I feel confident they will be able to recover one day. Look how fast WMT was able to turn it around when they too a hit a few days go.

      Thanks for the comment!
      Bert

  7. Nice buy and write-up. Didn’t know that CVS bought Target’s pharmacies. So any pharmacies in Target are branded CVS now or has just the owner changed and the Target branding remains? I guess I don’t get anything from a pharmacy yet to know.

    I just wish CVS would accept Apple Pay. They were part of the failed MCX experiment, CurrentC. Because of that, if I had the choice, I’ve been favoring Walgreens over CVS (at least from a customer standpoint).

    Scott

    • Thanks 2 investing! Nope, the generic items in target now are CVS products (at least the majority were last time my wife and I shopped there). Interesting take with ApplePay. I’m sure they will move in that direction eventually, right? I would imagine it is just a matter of time until all major retailers accept it.

      Bert

Leave a Reply

Your email address will not be published. Required fields are marked *