Dividend Policy & Yield
Cardinal Health is a dividend stalwart with a 39-year streak of annual dividend increases ([3]). The raises have been modest in recent years (just ~1% increments), but consistency is key. In fiscal 2023, the company paid out $1.98 per share in dividends, a 1% bump from 2022 ([4]). The quarterly payout was increased to about $0.51 per share in mid-2024, putting the annualized dividend around $2.04. At the current share price, that equates to a yield of roughly ~2%, which is higher than peers like McKesson and Cencora (AmerisourceBergen) whose yields are nearer 1% or less (those rivals emphasize buybacks over dividends). Cardinal’s dividend may not be high-growth, but it is dependable – a hallmark of a Dividend Aristocrat ([5]). Importantly, the payout is very well-covered by earnings and cash flow (payout ratio ~25% of adjusted earnings, as detailed next), suggesting the dividend’s safety.
Cash Flow and Coverage
Cardinal Health generates robust cash flow that comfortably funds its dividend and other obligations. In fiscal 2023, operating cash flow was $2.8 billion ([4]), of which only about $525 million went toward dividends ([4]). In other words, dividends used less than 20% of annual cash from operations, leaving ample room for debt reduction, buybacks and reinvestment. Even after $579 million of debt repayment and $2.0 billion of share repurchases in 2023, Cardinal’s cash balance remained a hefty $4.0 billion ([4]). This liquidity provides a solid cushion. Interest expense is also well covered – the company paid just $203 million in interest in 2023 ([4]), an immaterial amount relative to $2.8B+ in cash flow. On an adjusted earnings basis, Cardinal earned $7.84 per share in FY2025 (guidance midpoint) ([2]), whereas it paid out about $2.00 – a comfortable ~25% payout. The bottom line is that Cardinal’s dividend and debt obligations are supported by strong cash generation and a sound balance sheet.
Leverage and Debt Maturities
Despite major shareholder returns and acquisitions, Cardinal’s balance sheet remains conservatively leveraged. The company ended fiscal 2023 with $4.7 billion in total debt (including current portion) ([4]), offset by roughly $4.0 billion in cash ([4]). Net debt was therefore only about $0.7B – quite low for a firm with over $200 billion in annual revenues. In 2023, management repaid ~$579 million of debt ([4]) and even retired some bonds early. The debt maturity profile is well-staggered: about $0.8B matures in FY2024, $0.43B in 2025 and $0.53B in 2026, then a larger $1.3B around 2027, with minimal due in 2028 and roughly $1.6B thereafter ([4]). These future maturities (especially the 2027 tranche) are very manageable given Cardinal’s cash flow and existing cash on hand. The company also has substantial liquidity via a $2B credit facility and $1B receivables facility, both largely undrawn ([4]) ([4]). Overall leverage is modest – roughly 1.5× EBITDA on a net basis by estimates – giving Cardinal flexibility to continue investing in its specialty expansion and returning cash to shareholders.
Valuation and Peer Comparison
Even after its strong stock performance in 2025, Cardinal Health’s valuation appears undemanding. At around 10× forward earnings (using management’s FY2026 EPS forecast of ~$9.40 ([6])), CAH trades at a discount to the broader market and slightly below top peers. For comparison, McKesson trades near ~12× forward earnings and Cencora (AmerisourceBergen) in the ~11× range, despite similar growth profiles. Cardinal’s dividend yield (~2%) also handily tops McKesson’s (~0.6%) and Cencora’s (~1.4%). The market seems to be assigning a cautious discount to Cardinal – possibly due to its recent contract loss (more on that risk below) and past struggles in its medical products division. But if Cardinal can hit its FY2026 EPS target of $9.30–$9.50 ([6]), the stock is very cheap on a PEG basis given analysts expect double-digit earnings growth. In fact, some on Wall Street see significant upside: Morgan Stanley, for example, maintains an Overweight rating with a $181 price target on CAH ([5]), implying the stock could double from recent levels. Such bullish views hinge on Cardinal unlocking value in its higher-margin businesses (specialty distribution, medical segment turnaround) and merit consideration. For now, investors are getting a steady dividend and aggressive share buybacks (over $3B authorized through 2024) at a bargain valuation.
Risks and Red Flags
No investment is without risks, and Cardinal Health has a few notable ones. Thin margins and customer concentration: As a pharmaceutical distributor, Cardinal operates on razor-thin margins, so operational hiccups or lost contracts can bite hard. This was evident in mid-2025 when Cardinal’s quarterly results came in weak after it lost a major OptumRx contract, causing a near-6% drop in shares ([6]). The risk of intense competition – from peers or even large buyers integrating supply chains – is an ever-present threat. Cardinal must continuously win or renew big customer deals to avoid revenue lapses. Opioid litigation liability: Cardinal, along with industry peers, faced massive lawsuits related to opioid distribution. The company joined a national settlement in 2022; its total payout obligation is about $5.8 billion spread over ~18 years ([4]). While this resolved the bulk of legal uncertainty, it does consume cash (roughly $400–$500M of payments annually in coming years) and any new lawsuits or holdouts could pose additional overhang. Medical segment struggles: Cardinal’s Medical Products & Distribution (GMPD) segment has been under pressure. Post-pandemic declines in PPE demand, inflation in supply costs, and execution issues led to goodwill impairment charges of over $1.2 billion in this segment during 2022–2023 ([4]). An activist investor (Elliott Management) pushed for improvements – resulting in new board members and a “GMPD Improvement Plan.” Execution risk remains: if margins in the medical segment don’t rebound or decline further, it could drag on overall profits. Regulatory and pricing headwinds: Being in the middle of the pharmaceutical supply chain exposes Cardinal to potential drug pricing reforms and regulatory changes. For instance, pressure to lower drug costs could squeeze distributors’ cut, and healthcare policy shifts (Medicare drug negotiations, pharmacy reimbursement changes) could indirectly impact Cardinal’s profitability. Additionally, any disruption in the flow of high-value new drugs (e.g. if a blockbuster like the GLP-1 category faces setbacks) might temper the growth in Cardinal’s specialty business ([2]). Lastly, integration and strategy risks must be noted – Cardinal is spending billions to acquire specialty physician networks (Solaris Health for $1.9B, Integrated Oncology Network, etc.) ([6]) ([6]). These deals aim to bolster higher-margin offerings, but success is not guaranteed. Missteps in integrating acquisitions or realizing expected synergies could disappoint investors.
Outlook and Open Questions
Cardinal Health’s future largely hinges on its ability to capitalize on the healthcare industry’s shift toward specialty therapies while shoring up its own operational weak spots. The opportunity is clear: demand for specialty pharmaceuticals – from biologics for cancer to orphan-disease drugs for conditions like CAH – is booming, and Cardinal’s pharmaceutical segment is benefitting from this trend ([2]). Its recent forecast for ~20% EPS growth into FY2026 reflects confidence in these tailwinds ([6]). The company is also proactively reshaping itself, investing in higher-margin areas and technology (analytics platforms like PPS and “Sonar” for specialty networks) ([3]) to differentiate its services. However, open questions remain. First, can the Medical products division be fixed or will Cardinal ultimately consider a spinoff or sale? Thus far, management has opted to improve operations internally, but investors are watching whether the GMPD Improvement Plan delivers measurable margin recovery. Second, will Cardinal’s push into specialty physician services (via acquisitions) meaningfully boost its competitive moat, or could it backfire if not executed well? The Solaris acquisition expands Cardinal’s reach in urology and other practices ([6]), but integration will be key. Another question: can Cardinal win new contracts to replace any business lost (like OptumRx) and keep its core distribution revenue growing? The company’s raised guidance suggests optimism on this front ([6]), but it’s an area to monitor in coming quarters. Lastly, how will Cardinal deploy its strong cash flows going forward – will dividend growth accelerate beyond the token 1% raises, or will buybacks remain the preferred route for returning capital? Given a solid balance sheet, management has flexibility to reward shareholders if growth initiatives stay on track.
Conclusion
Cardinal Health offers an appealing mix of defense and offense. On the defensive side, investors get a stable ~2% yield from a dividend that has been raised for nearly four decades straight ([3]), backed by a rock-solid coverage ratio ([4]) and a reasonably strong balance sheet. On the offensive side, Cardinal is leveraging its scale to ride the wave of new high-value therapies – from specialty drugs to at-home care products – that promise to boost margins above the historically thin levels. The stock’s valuation leaves room for upside if these efforts bear fruit: at ~10 times forward earnings, much of the pessimism (contract losses, opioid costs, segment woes) may be priced in. Indeed, Cardinal’s growth initiatives are already evident in its performance – the stock is up 40%+ in 2025 with total returns outpacing the healthcare sector ([5]), yet the shares still look inexpensive relative to peers and the market. To be sure, execution is critical from here. Investors should watch for continued momentum in the Pharmaceutical segment (e.g. specialty drug volumes) and tangible improvement in the Medical segment’s profitability. Any major stumble on those fronts would be a warning sign. Barring that, Cardinal Health appears positioned to keep delivering steady income and renewed earnings growth. With a generational pipeline of new therapies emerging (highlighted by developments like Crinetics’ CAH drug trial) and healthcare providers relying on distributors’ expertise more than ever, Cardinal’s services are in demand. For investors with a balanced outlook, CAH offers both stability and a stake in the evolving healthcare landscape – making a compelling case to consider getting in now.
Sources: Cardinal Health 2023 10-K ([4]) ([4]); Cardinal Health Investor Relations; Reuters ([6]) ([2]); 24/7 Wall St ([5]); Insider Monkey ([3]).
URGENT: Get “Trump\'s Secret Fund” — Learn How to Collect Royalty Checks
Limited report reveals the #1 American oil & gas royalty play that can start paying monthly — with just $50.
Start w/ $50
Yes — Send My Report
Fast download • Instant access • Seats limited
Sources
- https://stocktitan.net/news/CRNX/crinetics-announces-first-patient-dosed-in-pivotal-adult-trial-of-41eo23swsqb1.html
- https://reuters.com/business/healthcare-pharmaceuticals/cardinal-health-forecasts-annual-profit-higher-end-prior-range-2025-01-14/
- https://insidermonkey.com/blog/15-best-dividend-stocks-of-2025-1558912/9/
- https://sec.gov/Archives/edgar/data/721371/000072137123000060/cah-20230630.htm
- https://247wallst.com/investing/2025/07/02/5-strong-buy-rated-dividend-stocks-are-among-the-sp-500-top-performers-in-2025/
- https://reuters.com/legal/transactional/cardinal-health-buy-solaris-health-19-billion-posts-weak-results-2025-08-12/
For informational purposes only; not investment advice.
