Portfolio Management
CVS Health (CVS) reported an increase to its quarterly dividend on Monday. It also announced that it has established a new stock buyback program. Here’s what the news means for mutual fund investors.
Inside the News
Dividend Boost
CVS Health (CVS) raised its dividend by 27% to 35 cents per share, or $1.40 annually. The next dividend will paid on February 2 to shareholders of record on January 22.
Buyback Program
The company announced a new $10 billion buyback program. The new program will be effective immediately. It will be added to the company’s current $2.7 billion.
Outperforming Its Peers
This dividend increase of 27% is significant, but the company’s new yield of 1.5% is not ideal for dividend investors. On the upside, this stock has performed twice as well as Walgreen Company (WAG) over the last five years. In five years, CVS is up 188%, while WAG is up just 90%.
This stock is starting to have an expensive valuation, but it does have a lot of room to grow its dividend in the future.
Mutual Funds to Watch
Investors interested in CVS may also consider a mutual fund as an alternative to owning the individual stock. The funds below currently hold the largest stakes in the company.
| Symbol | Mutual Fund | Stake |
|---|---|---|
| {% mutualfund VTSMX %} | Vanguard Total Stock Market Index | 1.68% |
| {% mutualfund FCNTX %} | Fidelity® Contrafund® | 1.06% |
| {% mutualfund VFINX %} | Vanguard 500 Index | 0.45% |
The Bottom Line
By investing in one of the funds above, investors are able to gain exposure to a wide range of holdings and industries. Investors interested in CVS may also be interested in Walgreen Company (WAG) and Aetna (AET).
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