Cardinal Health (CAH) is emerging as a strong player in the healthcare sector, particularly in pharmaceutical distribution and oncology drugs, providing a more stable investment option compared to UnitedHealth Group (UNH), which is currently facing significant challenges. With a trading price near its all-time high of $153 per share, Cardinal Health presents a promising growth opportunity, driven by robust cash flows and its established history of consistent dividend increases over the past three decades.
In stark contrast, UnitedHealth has been grappling with a decline in its stock price—over 50% since April 2025—due to a first-quarter earnings miss, a Department of Justice investigation into Medicare fraud, and the unexpected resignation of CEO Andrew Witty amidst rising medical costs and public scrutiny.
Cardinal Health’s operational strengths position it favorably in the market. The company serves approximately 90% of U.S. hospitals, benefiting significantly from demographic trends such as an aging population and increasing prescription drug usage. According to analytics firm IQVIA, retail and long-term care prescriptions reached 7.1 billion in 2024, marking a notable increase in market demand.
In its most recent fiscal third-quarter report, Cardinal Health reported a 19% rise in revenue, totaling $54.9 billion, driven by its pharmaceutical distribution and generics programs, alongside a promising outlook of 10% annual revenue and earnings growth through 2027. With strategic acquisitions, such as the recent $1.2 billion Specialty Networks deal, the company is expanding its oncology capabilities, further bolstering its financial health.
The company’s dividend strategy remains a significant attraction, offering a yield of 1.3% and a sustainable payout ratio of 22% of free cash flow. While there are some concerns regarding its $7.1 billion debt, Cardinal Health maintains a solid A- credit rating, emphasizing its stability in a volatile market.
In conclusion, Cardinal Health’s alignment with significant healthcare trends, resilient operational framework, and growth potential in a less regulated environment make it an appealing alternative for investors seeking a less tumultuous path in the evolving health sector. Investors interested in stable income and growth potential might find Cardinal Health to be a promising choice amid current uncertainties in the healthcare market.