Our newest addition is a large health benefits company with a beta of 0.70, which means its share price has moved less than the broader market over the past 5 years. It sells medical coverage to employers, individuals and government programs, and it pairs that coverage with pharmacy benefits and care services. Growth is coming from senior health plans, a strong employer sales pipeline and technology that lowers medical costs. The main pressure point is a low-income state health plan business that is losing money this year.
The dividend looks well protected. The company holds more cash than debt, pays out 24% of forward earnings and has raised its dividend for 15 consecutive years. Management lifted its full-year earnings outlook in the most recent quarter and raised its operating cash flow target to at least $6 billion. That cash generation covers the yearly dividend bill several times over. The trade-off is a 1.71% yield, which sits in the bottom 40% of dividend stocks. Investors here are paying for stability and a growing payout rather than a large income stream today.
We have added this stock to the Dividend Protection Stocks Portfolio because its balance sheet and payout discipline give it a wide cushion against a tough medical cost cycle. Its low price swings and steady dividend growth fit a mandate built around keeping income safe.
