Will UnitedHealth Group or CME Group be the better dividend-paying stock to invest in for the next five years? 7investing CEO Simon Erickson compares the two companies in today's Summer Stockpicking Challenge matchup.
July 18, 2023
Welcome to our 7investing Growth vs Income Summer Stock Challenge! We are on a quest to find the best current stock opportunity for investors.
All month, we’re pairing popular “growth” and “income” stocks up in head-to-head matchups — to ultimately determine which stock will provide the greatest upcoming five-year return. We’ve included voting polls within this article: please help us determine which of these stocks represents the better current opportunity for investors!
To have all our our analysis and the official voting results sent directly to your Inbox, click below to join our Summer Stock Challenge email list:
In this “Income Style, Round 1, Matchup 2” bracket, our #3 ranked mega health insurer UnitedHealth Group (NYSE: UNH) is paired up against #6-ranked exchange operator CME Group (Nasdaq: CME).
Both of these companies serve hundreds of millions of people, capturing recurring revenues and extremely high margins. When looking over the next five years, which will prove to be the better investment?
Today on our Summer Stock Challenge: Growth vs. Income – a battle of income behemoths!
CME Group has operated exchanges for more than 100 years.
UnitedHealth Group is one of the world's largest health insurers.
Which will perform better over the next 5 years?
— 7investing (@7investing) July 18, 2023
UnitedHealth Group (NYSE: UNH) is America’s largest health insurance provider. It provides coverage for 50 million individuals with a wide variety of employer-sponsored or individual health plans.
United has been driving the entire industry to adopt value-based care, where providers charge based upon outcomes rather than simply the volume of services provided. It also benefits as an investment from people being loathe to changing plans; creating a recurring stream of recurring premiums every year.
Revenue of $93 billion last quarter (and no, that’s not a typo) were up 16% and United generated $11 billion in operating cash flow. The company is also extremely efficient, with an operating cost ratio of less than 15% (this represents the overall operating costs divided by sales; where lower is better).
United has compiled far more data than any of its competitors, and it shares it lucrative profit stream with investors through a dividend that increases at a double-digit rate every year. Its current annual dividend of $7.52 per share is 118% greater than the $3.45 it paid out five years ago. At today’s stock price of nearly $500, the shares yield 1.4%
Looking forward, most believe UnitedHealth’s Top Dog dominance of its industry will continue. America’s health care policy is continually in flux, but this is a build-to-last company who will easily maneuver any regulatory changes.
CME Group is one of the world’s largest and most diverse exchanges. Investors can trade everything from butter to Bitcoin, as a way to maximize their gains or to hedge their financials risks.
While several companies mention macroeconomic headwinds such as rising costs or rising interest rates as headwinds working against their business, these are actually tailwinds for CME Group. Average daily volumes last month was the second-highest in the company’s history, with ADV hitting 23.3 million contracts in June and an average of 22.9 million contracts during the second quarter. Certain pockets of its business grew extremely quickly — such as short term rate futures’ volume doubling over the previous quarter and increasing 400% over the previous year.
CME’s consolidated revenue grow a modest 7%, yet that growth is falling quickly to the bottom line. Due to the efficiency of its platform, its earnings per share in the same period were up 25%.
That makes CME a contrarian play, providing a hedge against the volatility that occurs when the price of goods or currencies or interest rates either skyrockets or plummets. It shares that predictable and recurring profit stream with investors through its variable dividend policy. CME’s $8.70 total payout of both quarterly and special dividends during the past twelve months represents a 4.7% yield. Since initiating its dividend policy in 2021, the company has returned over $21 billion to shareholders.
Will UnitedHealth Group or CME Group be the better investment for the upcoming five year period? Cast your vote in our live poll below!
Today on our Summer Stock Challenge: Growth vs. Income – a battle of income behemoths!
CME Group has operated exchanges for more than 100 years.
UnitedHealth Group is one of the world's largest health insurers.
Which will perform better over the next 5 years?
— 7investing (@7investing) July 18, 2023
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