After three years of single-digit earnings growth,CVS Caremark
) rebounded in 2012.
Final results haven't been reported yet, but the Street
estimates 2012 EPS climbed 21%. Analysts expect earnings this
year to rise 16%.
The five-year EPS Stability Factor is 4 on a gauge that runs
from 0 (calm) to 99 (erratic).
For the income investor this is good news because stable
earnings growth provides a platform for dividend growth. CVS has
increased its dividend for 10 consecutive years and aggressively
since 2007. In the past six years, the annualized payout rose
from 15.5 cents a share to 65 cents a share last year.
In December, the company announced that the quarterly payout
would be jacked up from 16.25 cents to 22.5 cents a share, or
annually from 65 cents to 90 cents. The new quarterly rate will
be paid on Feb. 4 to shareholders of record Jan. 24.
The current annualized yield is 1.7%, which is below the
S&P 500's 2.56% yield.
However, CVS Caremark's stock-price appreciation has been
better than the major indexes. Over the past five years, CVS rose
40% vs. 33% for the Nasdaq and 11% for the S&P 500. Last
year, CVS advanced 23%, topping the Nasdaq's 19% gain.
The company has more than 7,400 drugstores, a pharmacy
benefits unit serving 63 million plan members and 640
MinuteClinics in 25 states.
CVS intends to grow the MinuteClinics to 1,500 in 35 states by
In Q3, pharmacy services accounted for about 60% of net
Drawbacks include the government's role in the health sector;
slim margins in the PBM business; and a return on equity of about
10% in 2011 -- well below the 17% minimum associated with elite
The Composite Rating of 82 also is somewhat low, though about
two months ago, it was 68. The rating combines all five IBD
ratings into a single number. A rating of 82 means the stock is
rated higher than 82% of the stocks in IBD's database.
Q4 and full 2012 results will be released Feb. 6.
CVS cleared a 47.88 buy point in a first-stage double-bottom
base in December. The stock is extended from a valid buy