The insurance sector has long been considered a prime investment option for many people. Insurance companies typically offer steady growth to go along with very nice dividends, providing the stability that helps to strengthen a portfolio. In the following article, I take an in-depth look at Aetna Inc. (AET, Financial), AFLAC Incorporated (AFL, Financial), Cigna Corporation (CI, Financial), UnitedHealth Group Incorporated (UNH, Financial) and WellPoint Inc. (WLP, Financial) to see if these stocks stand up to the reputation of the insurance industry and give us the kind of investment we want to pick up in 2012. I chose these five stocks for this article because they provide an excellent starting point for discussion of the insurance sector.
Aetna Inc.
Aetna is a diversified healthcare benefits company. The Connecticut-based company was founded in 1982, and it is offering excellent growth and a rising dividend. Aetna, currently trading around $45.75 per share, is an active company, expanding its areas of coverage and involving itself in the on-going discussion of such things as President Obama's recent decision to provide free birth control to employees of religious organizations.
Trading within a one-year range of $33.43 to $46.01 and having a target estimate of nearly $54 per share, the company is able to provide great increases with a $0.70 dividend (1.5% yield). With a reasonable 1.57 price to book ratio, a quarterly earnings growth of almost 73% and plans to expand its chronic kidney-disease management plan, the company is showing the ability to maintain its expansion. I definitely recommend Aetna as a buy at this time.
AFLAC Incorporated
While many people associate AFLAC with its famous duck mascot from the television commercials, there is very little that investors would consider "foul" with this insurance provider. Although its stock price saw a 15% in the past year, the stock is expected to recover that amount this year (a 15% increase due to its one-year target of $54.67) in addition to giving its dividend yield a record boost from 1.9% to an impressive 2.7%. This combination of growth and yield will make the company an excellent acquisition.
Currently trading around $48.50 per share, AFLAC has a 52-week range of $31.25 - $59.54. While it is unlikely to challenge that top, it is expected to make a big climb in 2012, as the company builds on its 25% year-to-year earnings growth and the issuance of long-term, fixed-rate notes to fund the repayment of maturing debt. The company has a low price to book ratio of 1.66 and a very solid debt to equity ratio of 24.32. This is a very good company and an excellent buy for investors looking to add a mixed stock to their portfolios.
Cigna Corporation
In spite of some interesting metrics, I am not excited about the prospects for Cigna Corporation. The Connecticut-based company is a $12 billion health service organization that traditionally offers both growth and dividends. Although the company pays an annual dividend of $0.04 (for a yield of 0.10%) and is projected to see a 25% growth in share price in the coming year (currently near $44 per share and projected at $54.50), the company's lackluster results in 2011 and the looming Obama-backed birth control legislation could be enough to put the brakes on Cigna's growth plans.
Although Cigna started out strong in 2011, a 25% drop in share price in July undermined its growth. The price has been largely flat ever since, spending most of the past eight months trading below its 200-day moving average. While some analysts see it as undervalued, it is reasonable according to its price to book ratio of 1.52. The company trails the S&P index by a hefty 16%, and its 35% decline in earnings far overshadows its 6.6% climb in year-to-year revenue. In a sector that enjoys big movers, Cigna has been too sluggish to generate any excitement. While some positive news or acquisitions could possibly get it moving again, I consider Cigna Corp to be a hold at this time.
UnitedHealth Group Inc.
If Cigna looks like a slow mover right now, UnitedHealth Group is its contrast. The company specializes in offering diversified health and well-being services to individuals and companies, and it has a reputation for offering one of the fastest-growing dividends in the past decade. Currently paying $0.65 for a yield of 1.2%, the stock is trading near $54 per share and generating additional excitement for its one-year target of $61.55 (for nearly a 15% increase).
UnitedHealth is one of the few companies to enjoy a five-year growth of over 80% in their dividends. Coming in at 93% over that period, this sustained dividend growth combined with a 25% climb in share price over the past year to make the company very attractive. Still sporting a price to book ratio of 2 and an appealing 19% return on equity, I see UnitedHealth Group as a strong buy going forward.
WellPoint Inc.
Although investors often use past performance to suggest a company's prospects, that would be a potential mistake in the case of WellPoint. WellPoint Inc. is a $23 billion health benefits company headquartered in Indianapolis, Ind. The company experienced a relatively flat 2011 due to pressures from the medical industry, but all signs point to a strong 2012 for the company. While last year saw the company's benefit to expense ratio climb more than two percent and a contracting change increased physician service costs, the company expects this year to be better. Although it had a quarterly revenue increase of 4.6%, the additional costs caused its earnings to dip nearly 39%.
Cost-cutting, like dropping coverage of Pfizer Inc's cholesterol-reducing Lipitor for lower-priced generics, is one of the moves that is expected to raise the company's share price about 30% from its current $64.50 per share to an impressive $84.50. This price surge, in additional to an announced dividend yield increase from 1.6% to 1.8% has many investors excited about the upside of WellPoint. I am in that group, and I highly recommend everyone take a look at adding a position in the company.
Insurance Stock for a Healthy Portfolio
Mixed growth and dividend stocks are widely viewed as some of the best shares to hold for stabilizing a portfolio. The insurance sector is a great place to find such values. With their strong upside, I recommend Aetna Inc., AFLAC Inc., UnitedHealth Group Incorporated and WellPoint Inc. as immediate options to hold. I do suggest not moving on Cigna Corporation until the stock once again shows signs of an upward trend.
Aetna Inc.
Aetna is a diversified healthcare benefits company. The Connecticut-based company was founded in 1982, and it is offering excellent growth and a rising dividend. Aetna, currently trading around $45.75 per share, is an active company, expanding its areas of coverage and involving itself in the on-going discussion of such things as President Obama's recent decision to provide free birth control to employees of religious organizations.
Trading within a one-year range of $33.43 to $46.01 and having a target estimate of nearly $54 per share, the company is able to provide great increases with a $0.70 dividend (1.5% yield). With a reasonable 1.57 price to book ratio, a quarterly earnings growth of almost 73% and plans to expand its chronic kidney-disease management plan, the company is showing the ability to maintain its expansion. I definitely recommend Aetna as a buy at this time.
AFLAC Incorporated
While many people associate AFLAC with its famous duck mascot from the television commercials, there is very little that investors would consider "foul" with this insurance provider. Although its stock price saw a 15% in the past year, the stock is expected to recover that amount this year (a 15% increase due to its one-year target of $54.67) in addition to giving its dividend yield a record boost from 1.9% to an impressive 2.7%. This combination of growth and yield will make the company an excellent acquisition.
Currently trading around $48.50 per share, AFLAC has a 52-week range of $31.25 - $59.54. While it is unlikely to challenge that top, it is expected to make a big climb in 2012, as the company builds on its 25% year-to-year earnings growth and the issuance of long-term, fixed-rate notes to fund the repayment of maturing debt. The company has a low price to book ratio of 1.66 and a very solid debt to equity ratio of 24.32. This is a very good company and an excellent buy for investors looking to add a mixed stock to their portfolios.
Cigna Corporation
In spite of some interesting metrics, I am not excited about the prospects for Cigna Corporation. The Connecticut-based company is a $12 billion health service organization that traditionally offers both growth and dividends. Although the company pays an annual dividend of $0.04 (for a yield of 0.10%) and is projected to see a 25% growth in share price in the coming year (currently near $44 per share and projected at $54.50), the company's lackluster results in 2011 and the looming Obama-backed birth control legislation could be enough to put the brakes on Cigna's growth plans.
Although Cigna started out strong in 2011, a 25% drop in share price in July undermined its growth. The price has been largely flat ever since, spending most of the past eight months trading below its 200-day moving average. While some analysts see it as undervalued, it is reasonable according to its price to book ratio of 1.52. The company trails the S&P index by a hefty 16%, and its 35% decline in earnings far overshadows its 6.6% climb in year-to-year revenue. In a sector that enjoys big movers, Cigna has been too sluggish to generate any excitement. While some positive news or acquisitions could possibly get it moving again, I consider Cigna Corp to be a hold at this time.
UnitedHealth Group Inc.
If Cigna looks like a slow mover right now, UnitedHealth Group is its contrast. The company specializes in offering diversified health and well-being services to individuals and companies, and it has a reputation for offering one of the fastest-growing dividends in the past decade. Currently paying $0.65 for a yield of 1.2%, the stock is trading near $54 per share and generating additional excitement for its one-year target of $61.55 (for nearly a 15% increase).
UnitedHealth is one of the few companies to enjoy a five-year growth of over 80% in their dividends. Coming in at 93% over that period, this sustained dividend growth combined with a 25% climb in share price over the past year to make the company very attractive. Still sporting a price to book ratio of 2 and an appealing 19% return on equity, I see UnitedHealth Group as a strong buy going forward.
WellPoint Inc.
Although investors often use past performance to suggest a company's prospects, that would be a potential mistake in the case of WellPoint. WellPoint Inc. is a $23 billion health benefits company headquartered in Indianapolis, Ind. The company experienced a relatively flat 2011 due to pressures from the medical industry, but all signs point to a strong 2012 for the company. While last year saw the company's benefit to expense ratio climb more than two percent and a contracting change increased physician service costs, the company expects this year to be better. Although it had a quarterly revenue increase of 4.6%, the additional costs caused its earnings to dip nearly 39%.
Cost-cutting, like dropping coverage of Pfizer Inc's cholesterol-reducing Lipitor for lower-priced generics, is one of the moves that is expected to raise the company's share price about 30% from its current $64.50 per share to an impressive $84.50. This price surge, in additional to an announced dividend yield increase from 1.6% to 1.8% has many investors excited about the upside of WellPoint. I am in that group, and I highly recommend everyone take a look at adding a position in the company.
Insurance Stock for a Healthy Portfolio
Mixed growth and dividend stocks are widely viewed as some of the best shares to hold for stabilizing a portfolio. The insurance sector is a great place to find such values. With their strong upside, I recommend Aetna Inc., AFLAC Inc., UnitedHealth Group Incorporated and WellPoint Inc. as immediate options to hold. I do suggest not moving on Cigna Corporation until the stock once again shows signs of an upward trend.
