Of all the investment opportunities out there, I have a special place in my heart for dividend growth stocks. As a subset of those, I like the ones on the list of Dividends Champions, Contenders and Challengers even better.
But the most personal love goes out to those dividend growth stocks that I perceive to be undervalued.
My most recent dividend growth stock purchase falls - in my opinion - in that last category.
On June 19 I bought 15 shares of Cardinal Health, Inc. (CAH) for a total of $794.
In this post I go over the reasons for making this addition to my portfolio and what it means for my forward dividend income.
Cardinal Health, Inc. operates as an integrated healthcare services and products company worldwide.
The company’s Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical, over-the-counter healthcare, and consumer products to retailers, hospitals, and other healthcare providers. It offers distribution, inventory management, data reporting, new product launch support, and chargeback administration services to pharmaceutical manufacturers; pharmacy and medication therapy management, and patient outcomes services to hospitals, other healthcare providers, and payers; and consulting, patient support, and other services to pharmaceutical manufacturers and healthcare providers.
This segment also operates nuclear pharmacies and manufacturing facilities that manufacture, prepare, and deliver radiopharmaceuticals, as well as operates direct-to-patient specialty pharmacies; offers logistics, marketing, and other services; and repackages generic pharmaceuticals and over-the-counter healthcare products.
The company’s Medical segment manufactures and sources medical, surgical, and laboratory products, including cardiovascular and endovascular products; wound care products; surgical drapes, gowns, and apparel; exam and surgical gloves; fluid suction and collection systems; and incontinence, enteral feeding, urology, operating room supply, electrode and needle, and syringe and sharps disposal product lines.
It also distributes medical, surgical, and laboratory products to hospitals, ambulatory surgery centers, clinical laboratories, and other healthcare providers, as well as to patients in the home; and assembles and sells sterile and non-sterile procedure kits.
In addition, it offers supply chain services to healthcare providers; and post-acute care management, and transition services and software to hospitals, other healthcare providers, and payers.
Cardinal Health, Inc. was founded in 1979 and is headquartered in Dublin, Ohio.
CAH’s current dividend yield is 3.52% – slightly above the average 3.5% yield I strive for in building my portfolio.
The company is featured on David Fish’s list of Dividends Champions, Contenders and Challengers - with an impressive 21 year streak of growing dividend pay-outs.
The 5 year dividend growth is decent, 11.61% - with last year’s dividend growth coming in at 6.10%.
The Current Trailing Dividend Payout Ratio is at an attractive level, and sits at 36%.
CAH’s Earnings per Share (EPS) over the last five years shows an 5.66% increase. Projected EPS growth for the next 3-5 years is 4.21%.
The Cash Flow Growth Rate over the last 5 years is 7.52%.
The trailing 12 months Price/Earnings (P/E) is 10.09, which is significantly lower than it’s 5 year average of 27.16. It is also lower than the industry’s 5 year average of 23.45.
EVA Dimensions (an equity research firm) states in their June 20 report that AEP’s PRVit score is at the 60th percentile of all firms in its industry, which leads to a recommendation to Overweight. CAH is more attractively priced in relation to its true value than well over half of the stocks in its industry.
Ford Equity Research projects that CAH will perform in line with the market over the next 6 to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement. The research firm predicts a 52-Week Price Range between $50.80 - $79.68
Jefferson Research states that CAH is showing strong Balance Sheet Quality, Earnings Quality, Cash Flow Quality and Operating Efficiency, and Valuation suggests a lower amount of price risk. When combined, CAH deserves a BUY rating.
Given CAH’s annual dividend of $1.91 per share, this purchase increased my forward annual dividend income by $28.65.
What do you think about CAH right now? Are you buying other dividend growth stocks? Leave a comment/reply to share your thoughts!