Today, I added to a new position by purchasing shares of Cardinal Health (CAH) in my taxable account. I bought 20 shares, with a total cost of $1,069.35 ($53.12 / share, plus commission). The current yield is 3.6%. For a detailed summary of their history, etc. please visit: CAH's Seeking Alpha Profile.
CAH is a major distributor of medical goods, especially pharmaceuticals; I will borrow the Seeking Alpha description:
"Cardinal Health, Inc. engages in the provision of pharmaceutical and medical products. It operates through the Pharmaceutical and Medical segments. The Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products in the United States. The Medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products, which are sold in the United States, Canada, Europe, Asia and other markets. The company was founded by Robert D. Walter in 1971 and is headquartered in Dublin, OH. "
CAH has been battered this year. One horrible quarter coupled with intense political / public pressure on their industry (due to opioids) and the Amazon (AMZN) scare are definitely the biggest causes, but not the only reasons. They operate in a thin margin industry, but it is one of an long term oligopoly. The distribution industry is something that takes time to build. Its low margins means those thinking about joining the industry, such as AMZN, would probably look to other parts of that food chain for better margins (they did buy an online pharmacy). For this reason, along with the long term trends of better availability and necessity of medications, it is clear that CAH and the industry will be around for a long time competing primarily among themsevles.
That is the 800 lb gorilla in the room. CAH also sports a comfortable payout ratio and still has a steady Medical segment arm. This gives me exposure to multiple sides of the healthcare sector, which is always appreciated.
This purchase will add around $38 to my forward 12 month dividend income.
CAH is a major distributor of medical goods, especially pharmaceuticals; I will borrow the Seeking Alpha description:
"Cardinal Health, Inc. engages in the provision of pharmaceutical and medical products. It operates through the Pharmaceutical and Medical segments. The Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products in the United States. The Medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products, which are sold in the United States, Canada, Europe, Asia and other markets. The company was founded by Robert D. Walter in 1971 and is headquartered in Dublin, OH. "
CAH has been battered this year. One horrible quarter coupled with intense political / public pressure on their industry (due to opioids) and the Amazon (AMZN) scare are definitely the biggest causes, but not the only reasons. They operate in a thin margin industry, but it is one of an long term oligopoly. The distribution industry is something that takes time to build. Its low margins means those thinking about joining the industry, such as AMZN, would probably look to other parts of that food chain for better margins (they did buy an online pharmacy). For this reason, along with the long term trends of better availability and necessity of medications, it is clear that CAH and the industry will be around for a long time competing primarily among themsevles.
That is the 800 lb gorilla in the room. CAH also sports a comfortable payout ratio and still has a steady Medical segment arm. This gives me exposure to multiple sides of the healthcare sector, which is always appreciated.
This purchase will add around $38 to my forward 12 month dividend income.
I will update my portfolio page at the end of the month.
What do you think of CAH?
- Gremlin
- Long CAH, KDP
I like CAH for the long haul despite the 800 lb. gorilla in the room. I have not added to that name in a while as I'm content with my exposure for now. Of course, another major leg down might compel me to average down there. AMZN affected WMT's price. Also a little over a year GWW. Both have since climbed back in earnest. Not saying to ignore the 800 lb. threat but I do think it is overdone in the financial media. We'll see.
ReplyDeleteDivHut,
DeleteThanks for the comment. I agree about that gorilla, however I don't think they can maintain their current trajectory with our major political backlash. For that matter you cannot target and attempt to disrupt every industry without expecting the target to move from their backs to yours. That is definitely something that can be learned from the rhyming of history.
- Gremlin
A purchase in the Buckeye State. Gotta love it Gremlin. Like Divhut, I like them in the long haul. There are some obvious headwinds, cough cough Amanda, but in the end, I think they should prevail. I own a nice chunk as well. So we are fellow shareholders here!
ReplyDeleteBert
Bert,
DeleteThanks for the comment. Clearly lots of headwinds, but in the long run I see CAH just being a loaded spring of potential. Here is to those new dividends for us both!
- Gremlin