Safe Dividend Stocks for the Next Market Crash: CVS Health (CVS)
CVS Dividend Yield: 2.5%
5-year Annual Dividend Growth Rate: 27.7%
CVS is best known for being the second largest chain of pharmacies, composed of more than 9,600 stores spread out over 49 states, DC, Puerto Rico, and Brazil.
However thanks to the company’s aggressive acquisition of numerous pharmacy benefits managers (PBMs) — which insurance companies pay to design, oversee, run their drug plans, as well as negotiate lower drug prices on their behalf — over the years, it’s also one of America’s largest PBMs.
In fact, today about 60% of CVS’s revenue comes from its PBM business.
Thanks to its massive size (CVS processed 1.3 billion prescriptions in 2016), the company is able to achieve large economies of scale that allow it to negotiate better with drugmakers, and thus improve the value of its PBM service to insurance companies.
In recent months, disappointing earnings guidance — courtesy of increasing competition from major rival Walgreens Boots Alliance Inc (NASDAQ:WBA) — has sent shares crashing nearly 20% in the past year.
However, despite the uncertainty surrounding potential slowing PBM growth (thanks to the potential replacement of Obamacare), this offers long-term investors a unique opportunity. Specifically, income investors can own a very safe (FCF payout ratio 55%) and appealing dividend, which likely will grow at a low double-digit annual rate over the coming years and help to protect you in the event of a market crash.