Recent Buy – UNH

Here’s a brief update on my latest stock purchase…

Just 2-3 weeks ago I added 2 new stocks to my Portfolio.  One of those positions has now grown a little bigger.

The stock is a major player in the Healthcare sector, UnitedHealth Group (UNH).

As noted at the time, UNH operates primarily in the U.S. as a diversified health care company through four segments: UnitedHealthcare (consumer-oriented health benefit plans and services), OptumHealth (health services business), OptumInsight (data and analytics, technology, and information), and OptumRx (pharmacy care services and programs).  The company was only founded in 1977, but has growth quickly to become the largest healthcare services company in the world.

UNH quickly went from my watchlist to my Portfolio, and now its a growing part of the Portfolio.  However, the position is still relatively small compared to my other positions.

UNH sits aside CVS Health (CVS) as another big healthcare company in my Portfolio.

Let’s go over the details of my most recent purchase of UnitedHealth Group…

 

UNH

On Friday, 9/6/19, I doubled my position by purchasing 6 shares at $229.0233/sh, for a total of $1,376.14, after commission.  The stock yielded 1.97% at my purchase price (well below my Portfolio average of 2.66%, but about on par with the S&P 500).

I paid about 5.1% less than last month for this newest set of shares, dropping my overall cost basis to $235.34/share.

At this point, there’s plenty of room to grow my UNH position.  I could easily see my share count tripling in size over time.

With the additional shares purchased, UNH climbed up to the 42nd position in Portfolio value out of my 47 Portfolio stocks.  Even if I purchased yet another 6 shares, UNH would still sit in the 42nd spot behind 3M Co. (MMM), as there’s a value gap between these two that’s fairly substantial.

This UNH purchase results in an additional $25.92 in annual forward dividend income, bringing my Portfolio’s current total to $10,401.15.  I’ll be collecting my first UNH dividend this month.

Here’s another look at the dividend growth history for UNH, dating back to the year 2005 when UNH started with their quarterly dividend payments.  A pattern of dividend raises started in 2010.  I showed this last month at the time of my initial purchase.

The recent history of dividend growth for UNH is exciting.  They’ve had growth rates of at least 20% in the 1-year, 3-year, 5-year and 10-year periods.

While UNH’s yield is one of the lower ones in my Portfolio, their yield should climb quickly if recent raise percentages can continue.  The last dividend raise from UNH came in at 20% this past June!  The trend suggests a raise on the order of 15%-20% should be possible next year.

A payout ratio below 30% (based on current year EPS estimates of $14.82/sh) and good earnings growth certainly leaves room to grow the dividend.

 

Are you a shareholder of UNH?  If not, is it a stock you are watching?  If so, what do you like about the company and their stock?  I look forward to your comments!

Posted on by Engineering Dividends

10 thoughts on “Recent Buy – UNH”

  1. I ha ve had UNH on my watchlist for quite some time but haven’t pulled the trigger yet. Great to see taking action and buying. Hopefully they can contineue to increase their dividend with such growth.

    1. Good to know, Mr. Robot. I didn’t realize you’d been watching UNH. I’ve had a couple of stocks on my watchlist for a while in BA and FDX, but haven’t made any moves on either. Sometimes the timing just isn’t right.
      If UNH can come close to replicating their dividend raise history over the past decade I’d be ecstatic. Heck, I’d be thrilled with just half of that. I’m keeping my fingers crossed. 🙂

        1. Awesome, Mr. Robot! I think you will be happy with UNH over time. Lots to like there. Snugfortune just made a purchase, too.
          I’m planning to continue to grow my position if the price remains favorable.

  2. UNH really looks interesting. In the past, divvy growth has been outstanding and theoretically there is more room for growth in the future. The FCF payout ration is sitting at only 35%.
    I’ve quickly checked Morningstar. They apply a quite conservative DCF method. MS estimates a fair value of $310. So it looks like there is decent upside for cap gains too.
    Furthermore, UNH scores best possible grades for Economic Moat (Wide) and Stewardship (Examplary). Good metrics across the board.
    I will include UNH to my watchlist.

    1. Hey, SF! Awesome to hear that you found a new stock for your watchlist in UNH. There’s a lot to like for sure, including those metrics you nicely detailed.
      I’ll be keeping an eye open with respect to your transactions to see if UNH makes a debut in your portfolio. 🙂

      1. I took a deeper dive into financials and decided to pull the buy trigger. You will be mentioned in the coming post ha! 🙂
        Cheers

        1. I just checked out your post, SF. Welcome to the UNH fold!
          When you said you ‘took a deeper dive into financials’, I initially thought that meant stocks in the Financial sector. However, after reading your post, I now understand that you meant the financials of UNH. So impressive, no?

  3. Nice buy ED! This company never got to my radar due to dividend yield below 2%. The growth rate looks impressive, though, so I should look more into this company. Thanks for the idea and good luck with your investment! I think it should serve you well.

    1. Thanks, BI. With the recent declines, the stock is close to entering your radar screen – the yield touches 2% at a price of $216.
      I don’t mind a lower yield if the stock appreciates at a good clip. For instance, one of my Portfolio’s best performers is Visa (V), which has had a yield well below 1% since I’ve held it starting in early 2016.

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