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

Looking for a good dividend stock to own? It might be worth taking a closer look UnitedHealth Group (NYSE:UNH). This is the best healthcare company to invest in, and while its profitability may not seem high, it can be a solid investment, especially if you hold it for the long term.

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

1. UnitedHealth has significantly increased its payouts over the years

Dividend Kings have an exceptionally long history of paying and increasing dividends, making them tempting choices for a certain class of investor. Income investors see these long dividend streaks as evidence that the stock is a safe income investment. However, in many cases, Dividend Kings only increase their payouts slightly, just to keep the streak going even if their financial results aren’t as strong.

UnitedHealth may not have a decades-long history of increasing its dividend, but it has shown that it prioritizes dividend growth over the past 14 years of payments. It has made a number of large dividend increases in recent years, and investors who have owned the healthcare stock for five years have seen their dividend income nearly double.

UNH dividend data by YCharts.

Although the current yield of 1.4% may seem disappointing (it is roughly equal S&P500 average), is average mainly because the share price is up 27% over the past year. Given the dividend growth, investors will be much better off with UnitedHealth’s dividend over the long term.

2. UnitedHealth is in a stable financial position

One thing investors need to consider when weighing up a potential dividend investment is how strong the underlying business is and whether it can sustain its dividend. In the case of UnitedHealth, the risk of not paying or even raising its dividend is minimal. The stock has a manageable payout ratio of just over 50%. If not for the hefty $7 billion expense it incurred in selling its Brazilian operations earlier this year, that percentage would be even lower.

The company has generated impressive growth over the years. Last year, the company reported revenue of $368 billion, up nearly 30% from the $285 billion it reported in 2021. During that same time, it saw a similar increase in profits, from $17 billion to more than $22 billion. UnitedHealth is a growth machine and is in a great position to continue to grow its revenues and profits over the long term.

3. UnitedHealth’s Acquisition Drive Could Accelerate Its Growth

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

Last year, the company acquired home care company LHC Group and hopes to complete the acquisition Amedisyswhich also provides home care services, in the coming months. UnitedHealth forecasts that its earnings should increase by 13% to 16% annually over the long term. Acquisitions and service expansions will be a big part of the continued earnings growth, along with the expansion of its Medicare business. If the company’s earnings can grow by double-digit percentages, it is also likely that not only will the dividend be safe, but that more dividend increases could follow.

Great dividend stock at a moderate valuation

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

UnitedHealth stock is an obvious investment for long-term investors, as you can benefit from both the long-term growth of the company (and the rising stock price that will surely follow) and the increasing dividend income you will receive from your investment over the years.

Is it worth investing $1,000 in UnitedHealth Group right now?

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David Jagielski has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.