Is It Too Late to Buy CVS Health Stock for the High-Yield Dividend?

Core Viewpoint - CVS Health's stock has surged 46.7% from the end of 2024 to February 14, 2025, following a strong fourth-quarter earnings report that exceeded Wall Street expectations by 29% with adjusted earnings of $1.19 per share [1]. Group 1: Strengths of CVS Health - CVS Health operates a diverse range of businesses, including retail pharmacies, pharmacy benefits management (PBM), and Aetna, which provides significant scale-related cost advantages [3][4]. - The company has maintained a strong dividend yield of 4% and has raised its dividend payout by 90% over the past decade, indicating a commitment to returning value to shareholders [2][8]. - Management projects adjusted earnings for 2025 to be between $5.75 and $6 per share, sufficient to support an annual dividend of $2.66 per share and reduce debt [7]. Group 2: Weaknesses and Challenges - CVS Health's PBM operations have faced scrutiny, including a lawsuit from the FTC alleging a broken rebate system that inflates drug prices, which could impact the company's reputation and operations [9]. - The Health Services segment, which includes the PBM, accounted for over 60% of total adjusted operating income, but revenue and operating income declined in 2024 due to lost business in California [10]. - Regulatory challenges are emerging, as seen in Oklahoma's new enforcement actions against PBMs, which could further complicate CVS Health's operations [11].