3 Reasons UnitedHealth Group Is One of the Best Dividend Stocks You Can Own

Looking for a good dividend stock to own? You might want to take a closer look at UnitedHealth Group (UNH -1.44%). It’s a top healthcare company to invest in, and while its returns may not look that great, it can be a solid investment, especially if you stick with it for the long term.

There are plenty of great reasons why dividend investors should buy this undervalued stock today. Here are three worth mentioning:

1. UnitedHealth has increased its payments significantly over the years

Dividend Kings have an exceptionally long history of paying and growing dividends, making them tempting choices for a certain class of investors. Income investors see those long dividend successes as evidence that a stock is a safe income investment. But in many cases, Dividend Kings only make modest increases in their payouts, all for the sake of maintaining the streak, even if their numbers aren’t that strong.

UnitedHealth may not have a decades-long track record of dividend growth, but it has shown that it prioritizes dividend growth over the past 14 years of payouts. It has experienced many large increases in its dividend in recent years, and investors who have held the health care stock for five years have seen their dividend income nearly double.

UNH Dividend Data by YCharts.

While its current yield of 1.4% may seem disappointing (it is roughly equal to S&P 500 average), is only average in large part because the stock price has appreciated 27% over the past year. When factoring in dividend growth, investors will be much better off with UnitedHealth’s dividend over the long term.

2. UnitedHealth is financially sound

One thing investors need to consider when looking at a potential dividend investment is how strong the underlying business is and whether it can sustain its dividend. With UnitedHealth, the risk of not paying or even not increasing the dividend is minimal. The stock has a manageable payout ratio of just over 50%. If it weren’t for a hefty $7 billion charge it took from the sale of its Brazilian operations earlier this year, that percentage would be even lower.

Over the years, the business has generated impressive growth. Last year, the company reported revenue of $368 billion, up nearly 30 percent from the $285 billion it had posted in 2021. And it saw similar growth in its earnings over that time, profits rising from $17 billion to over $22. billion. UnitedHealth is a growth machine and is in a great position to continue to grow its top and bottom lines over the long term.

3. UnitedHealth’s pursuit of acquisitions may accelerate its growth

It is not enough for a business to be in good shape today; investors also need to feel confident in the path it is on and know it can continue to grow. UnitedHealth has often sought acquisitions to diversify its business and strengthen its overall growth prospects.

The company acquired home health business LHC Group last year and hopes to close the acquisition Amedisyswhich is also involved in providing home health services in the coming months. UnitedHealth projects that over the long term, its earnings should be able to grow between 13% and 16% per year. The acquisitions and expansion of its services will go a long way to continuously grow its bottom line along with expanding its Medicare business. If the company’s earnings can grow by double-digit percentages, it’s also likely that not only will the dividend be safe, but more dividend increases could be coming.

A great dividend stock at a modest valuation

UnitedHealth is a top dividend stock and probably a good growth stock to own as well. And investors don’t have to pay a huge premium for it either. At a forward price-earnings multiple of 21, it trades at a slightly lower multiple than the average stock in Healthcare Select Sector SPDR Fundwhich trades at 22 times forward earnings.

UnitedHealth stock is a no-brainer for long-term investors because you can benefit from both the long-term growth (and share price appreciation that is sure to follow) and the growing dividend income you’ll receive from the investment during the year. years.