At a current yield of more than 3%, CVS Health Corporation (NYSE:CVS) is an interesting company for income-oriented investors to consider, given the current changing landscape CVS finds itself in.
In particular, the company’s pending acquisition of Aetna is one key catalyst which could change the landscape within the pharmacy/health care industry in the U.S., as further consolidation puts CVS in an interesting competitive spot relative to its peers.
The pharmacy space is one I have liked for some time, and is one key bricks and mortar segment I see continuing to thrive in the medium to long-term. The ability of CVS to continue to expand margins (this past quarter, the company saw operating margin and gross margin expand by 23 and 25 basis points, respectively) bolsters my confidence in the pricing power and relatively strong market positioning of CVS relative to other firms in the health care space.
The company’s Aetna acquisition is expected to close by the end of this fiscal year, a move which investors will be looking at closely in the quarters to come, to gauge just how well the combined company will be able to access and execute on the synergy-related growth strategies imbedded in this merger.
The ability of CVS to lock in relatively low cost bonds recently is likely to be viewed as a positive move as interest rates move higher, and the combined entity will have a unique angle at attempting to provide increased service to patients outside of acute-care settings, a move which has the potential to transform how folks receive health care over the long run, funding the company’s strong and growing dividend yield.
Invest wisely, my friends.
