I recently bought 31 shares of Cardinal Health Inc at $68.53 a share. I’ve been watching the company for some time now and when shares dropped ~10% in one day, I decided it was time to pounce.
Cardinal Health Inc (CAH) is a healthcare services and products company which operates through two segments: pharmaceutical and medical. The pharma division distributes both branded and generic drugs to retail (including large chains and independents) as well as hospitals and other health care facilities including surgery centers. The Medical segment is only around 10% of the pharmaceutical segment, by revenue. Cardinal Health is the third largest pharmaceutical distributor in the world when measured by revenue. CAH is a Dividend Aristocrat and has increased its dividend for 31 years in a row
CAH passed all of my screening criteria in the dividend screener and in addition to the the initial screen, CAH has some very strong fundamentals. EPS has grown 41% over the last 5 years while free cash flow has increased by 175% over the same period. They have done all of this while continuing to focus on the dividend – growing it 83% over the past 5 years. Currently the company has a 2.7% dividend yield which is very attractive.
My fair value estimate for CAH is $80, so I’m pumped to grab a few shares at a nice discount.
Since my purchase CAH has announced quarterly earning and the result are solid. Revenue grew 14% over the same period last year. This was driven by strong performance in both their pharmaceuticals and medical devices. There is no doubt that this company and industry faces some significant headwinds from a pricing standpoint and this will have an impact on earnings in the short term, but something tells me pharma and medical devices are here to stay.