CVS outlines growth strategies, announces 18% dividend increase

CVS HEALTH Corp. outlined strategies to drive long-term growth and shareholder value at its annual Analyst Day in New York City.
CVS HEALTH Corp. outlined strategies to drive long-term growth and shareholder value at its annual Analyst Day in New York City.

WOONSOCKET – CVS Health Corp. held its annual Analyst Day in New York City Thursday, outlining strategies to drive long-term growth and shareholder value, including a streamlining initiative expected to deliver $3 billion in savings over five years.
The company also announced an 18 percent dividend increase for 2017.

“By making care more affordable, accessible and effective, we can deliver value to all health care stakeholders, allowing us to be a partner of choice as they look to achieve their health care goals,” CVS Health President and CEO Larry J. Merlo said in a press release.

David M. Denton, executive vice president and chief financial officer, reviewed the company’s expectations for 2016 and 2017. He also discussed long-term growth targets and plans to maximize shareholder value, as well as a plan to deliver approximately $700 million to $750 million in annual savings by 2021.

“We have a proven track record of success in meeting our long-term growth targets and we are targeting, on average, 10 percent growth in adjusted EPS longer-term. We also expect $7 billion to $8 billion of cash to be available annually for enhancing shareholder value,” Denton said.

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“Given the recent changes in the marketplace and our outlook for 2017, we have put a plan in place to return to more robust levels of growth,” Denton added. “One element of this plan relates to our multi-year enterprise streamlining initiative, which aims to further improve productivity and to solidify the company’s low-cost provider status. We expect to deliver approximately $700 [million] to $750 million in annual savings across the enterprise by 2021, with cumulative savings of nearly $3 billion over the next five years. This will also free up capital for strategic investments that can help drive the continued growth and success of the enterprise.”

GAAP diluted EPS is now expected to be in the range of $4.82 to $4.88 in 2016 and $5.02 to $5.18 in 2017 due to an estimated $35 million asset impairment charge and an estimated $230 million lease obligation charge related to the enterprise streamlining initiative.

The company also announced that its board of directors approved an 18 percent increase in the annual dividend in 2017, which translates to $2 per share, 30 cents per share more than 2016. This is the company’s 14th consecutive year with a dividend increase, the company said.

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