A few years ago, CVS Health (NYSE:CVS) was a company that could seemingly do no wrong. However, recent concerns about falling drug prices and increased competition in the drug store industry have caused the stock price to fall from a high of $112 in the summer of 2012 to below $80 today. However, my discounted cash flow [DCF] model suggests that CVS shares deserve to return to the $100+ level, even using conservative assumptions.
Before I get into the DCF analysis, there are two important aspects of CVS that interest me right off the bat. First, CVS is a dividend aristocrat, with more than 10 years of consecutive dividend increases:
Based on that $2 per share of projected dividend payments this year, the stock yields approximately 2.6%, comparable with other dividend growth stalwarts such as Johnson & Johnson (NYSE:JNJ) and Coca Cola (NYSE:KO).
