Invest in Undervalued Dividend Stocks to Reap Gains in 2025
Investing in dividend stocks, especially during challenging times, can yield remarkable results. Two such companies worth considering are CVS Health and Johnson & Johnson, currently facing their own set of hurdles.
1. CVS Health
While CVS Health's stock value has taken a hit due to factors like reduced demand for COVID-related products and escalating Medicare Advantage plan expenses, there's a silver lining. The healthcare giant's leadership is devising a plan to enhance its MA business by 2025, promising improved margins and efficiency, even at the cost of potentially losing some customers.
Beyond its current issues, CVS Health boasts a long-term strategy that includes health insurance, primary care, and pharmacies, all aimed at providing patients with integrated care. Such an ecosystem is tailored to grow as the population ages, further strengthening CVS Health's prospects. Trust, an essential factor in any industry, has been built within its customer base and local communities.
As a dividend stock, CVS Health offers an enticing 5.78% yield, surpassing the S&P 500 index's yield. Its strong dividend growth and conservative payout ratio of 37.54% position it as a solid income investment choice for the long term.
2. Johnson & Johnson
Johnson & Johnson's legal battles, primarily surrounding its talc-based products, and regulatory changes, like U.S. price negotiations for certain drugs, pose challenges. However, history testifies to Johnson & Johnson's ability to weather such storms by leveraging its vast and diverse portfolio of pharmaceuticals and medical devices.
The company continues to introduce new drugs and expand labels, ensuring a steady stream of brand-new approvals. Its medical device business remains robust, with contributions from various therapeutic areas. Its strong revenue and profit record are partially due to the recession-resistant nature of its business. Johnson & Johnson’s creditworthiness even surpasses that of the U.S. government itself.
As a Dividend King, Johnson & Johnson has consistently increased its dividend for 62 consecutive years. The company's forward yield of 3.49% and conservative payout ratio of 33.48% make it an attractive choice for income-focused investors.
Though both companies face hurdles, understanding their strengths and capitalizing on growth opportunities can bring potential rewards.
- In the context of investing, even with CVS Health currently dealing with reduced demand for COVID-related products and rising Medicare Advantage plan expenses, the company's leadership is investing in its MA business, promising improvements by 2025. This strategy, coupled with its diverse business model, strong brand, and solid dividend yield, makes it an appealing long-term investment choice in finance.
- Johnson & Johnson, despite its legal battles and regulatory changes, has a proven track record of overcoming adversities. With its diverse portfolio in pharmaceuticals and medical devices, the company continually introduces new drugs and expands labels, ensuring growth. Its strong dividend history, high forward yield, and resilient business nature make it an attractive income investment in finance, offering potential rewards to those who can navigate its challenges.
