Drugs and Devices

Cardinal Health, Inc. is an integrated healthcare services and products company. It provides customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, and physician offices. The company operates through two segments, Pharmaceutical and Medical.

From Cardinal Health 2020 Q3 Presentation

The Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products. It also provides services to pharmaceutical manufacturers and healthcare providers for specialty pharmaceutical products; operates nuclear pharmacies and radiopharmaceutical manufacturing facilities; and offers pharmacy management services to hospitals, as well as medication therapy management and patient outcomes services to hospitals, other healthcare providers, and payers. This segment repackages generic pharmaceuticals and over-the-counter healthcare products.

The Medical segment manufactures, sources, and distributes Cardinal Health branded medical, surgical, and laboratory products. It also provides incontinence, wound care, enteral feeding, urology, operating room supply, electrode and needle, syringe, and sharps disposal products. In addition, this segment distributes a range of national brand products, including medical, surgical, and laboratory products; and provides supply chain services and solutions to hospitals, ambulatory surgery centers, clinical laboratories, and other healthcare providers.

Why I Bought CAH

Health care, in my opinion, is a win-win investment, assuming the company is a quality company. After reviewing CAH, I decided to start a position to add to my bigger health care-related investments. While this is not a complete list, the major investments we hold in health care include PFE, ABBV, JNJ, and MRK. PFE is by far, one of the largest holdings in our portfolio. ABBV is also a key portfolio investment. I also invest in health-care related REITs like MPW.

CAH has all of the growth, diversification and dividend growth attributes that contributed to my decision to further diversify into the health care sector.

What triggered my interest?

One of the tools I use in my Seeking Alpha premium subscription in the portfolio tool. I can create multiple portfolios, including specific portfolio list for Cindie’s investments and my investments. The nice thing about the tool is that you can also create a “wish list” portfolio. CAH was in that portfolio. As a result, I get email notifications of new articles and business events regarding CAH. Recent articles by Seeking Alpha authors convinced me that the market is not valuing CAH properly. I think it is a good long-term investment.

The Dividend Story

Most of my regular readers won’t be surprised by the following images. They help tell the story. Never overlook the payout ratio. Also, pay attention to what the business does with their dividend during a downturn. The years to remember for recent history are 2008-2009. Going forward, the years to remember will include 2020.

Cardinal Health (CAH) Dividend History
Cardinal Health (CAH) Dividend Growth
Cardinal Health (CAH) Dividend Scorecard from Seeking Alpha

Full Disclosure

I purchased 50 shares to begin. I plan to buy more shares if the price dips. Cardinal Health Seeking Alpha link: CAH