We all know how costly healthcare is, and that it’s big business, making plenty of people wealthy. You might be wondering, then, how you’d have done if you’d invested in some healthcare companies in years past. Here’s how you would have done if you’d plunked $100 in shares of CVS Health (NYSE: CVS) five years ago: Your investment would now be worth about $108.11.
That might not seem too bad, as you didn’t lose money, after all. But the past five years have been very good for the U.S. stock market in general. If you’d parked that $100 in an S&P 500 index fund instead, your investment would now be worth more like $171.46. Instead of having your money grow at an average annual rate of 1.6% in CVS Health, it would have averaged 11% in the S&P 500.
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Had you reinvested your dividends, your money would have grown faster on average — by 1.7% annually in CVS Health and 11.4% in the S&P 500 index fund.
You might be wondering whether it’s a good idea to invest in CVS Health now. It’s a fair question, as the company is growing. In its fourth quarter, it posted year-over-year revenue growth of 8.2% and full-year growth of 7.8%. But while its shares are not wildly overvalued, the company faces some challenges.
For example, via its Aetna business, it’s heavily involved in Medicare Advantage plans, and it looks as if those plans won’t see much of a bump in rates this year. Meanwhile, rising costs are eating into CVS’s already-slim profit margins. If you do invest, though, after digging more deeply into CVS Health, you can enjoy a dividend that recently yielded a solid 3.8%.
But know that there are faster-growing companies and faster-growing funds to consider for your portfolio, too. Plus, there are dividend-paying stocks offering more income.
Before you buy stock in CVS Health, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CVS Health wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $532,066!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,087,496!*
