Updated 3/6/25
Cencora, Inc., formerly known as AmerisourceBergen, is a major player in the pharmaceutical distribution industry. The company acts as a critical link between drug manufacturers and healthcare providers, ensuring that essential medications reach hospitals, pharmacies, and patients efficiently. With annual revenue exceeding $300 billion, Cencora is a powerhouse in its field, benefiting from the steady demand for pharmaceuticals.
Over the past year, Cencora’s stock has performed well, hitting a 52-week high of $262.26. Investors who focus on dividends often look beyond price movement, prioritizing sustainable income and financial stability. Cencora’s dividend policy is conservative but consistent, appealing to those who value long-term growth over high immediate payouts. Let’s take a closer look at how it measures up for dividend investors.
Key Dividend Metrics
📈 Dividend Yield – 0.87% (below its 5-year average of 1.24%)
💰 Annual Dividend – $2.20 per share
📊 Payout Ratio – 29.5% (low, indicating strong coverage)
🚀 5-Year Dividend Growth Rate – Consistent increases annually
📆 Recent Dividend Date – March 3, 2025
❌ Ex-Dividend Date – February 14, 2025
Dividend Overview
Cencora’s dividend yield of 0.87% might not be the most exciting for income investors, especially when compared to other dividend-paying stocks that offer yields over 3%. However, this stock isn’t about immediate high yield—it’s about steady and reliable growth.
A payout ratio of 29.5% suggests that the company is distributing a small portion of its earnings as dividends, leaving plenty of room for reinvestment in its operations. Companies with low payout ratios often have more flexibility to increase dividends over time without compromising financial health.
Cencora has demonstrated a strong commitment to growing its dividend, consistently raising it year after year. For investors who prioritize long-term total return rather than just immediate cash flow, this steady growth can be a significant advantage.
Dividend Growth and Safety
Cencora’s approach to dividends is cautious but reliable. The company has a track record of annual dividend increases, reinforcing its commitment to rewarding shareholders while maintaining a solid financial foundation.
With a payout ratio under 30%, there’s little risk of the dividend becoming unsustainable, even if earnings fluctuate. However, one area worth watching is cash flow. The company reported negative free cash flow of $164 million in the trailing twelve months, which could become a concern if it continues. While earnings remain strong, cash flow is the real driver of dividend stability, so this is something for investors to monitor going forward.
Chart Analysis
Overall Trend
The chart for Cencora, Inc. (COR) shows a steadily rising price trend, with some fluctuations throughout the year. The stock has bounced between support and resistance levels, but overall, it’s trending higher. The 50-day moving average (orange line) has had multiple interactions with the price, acting as both a support and resistance level. Meanwhile, the 200-day moving average (blue line) has been steadily rising, reinforcing the longer-term uptrend.
Moving Averages
The 50-day moving average is currently positioned above the 200-day moving average, which is generally a bullish sign. However, there have been periods where the price dipped below the 50-day line, signaling short-term corrections. The fact that the stock rebounded above the 50-day moving average in recent months suggests buyers have stepped in to defend the trend.
The 200-day moving average remains upward-sloping, which indicates that despite short-term pullbacks, the stock is maintaining a long-term uptrend. When the price tested this level, it acted as strong support, reinforcing the stock’s underlying strength.
Volume and Buying Pressure
Volume activity has been relatively stable, with occasional spikes that coincide with sharp price moves. The largest volume spikes occurred during breakouts or reversals, suggesting that institutional traders are actively participating at key levels.
Recently, volume has been lower compared to the biggest spikes seen earlier in the year, indicating a potential pause or consolidation phase. If volume picks up again, it could signal renewed momentum in either direction.
Relative Strength Index (RSI)
The RSI is currently around 58, which is in the neutral-to-bullish range. This suggests that the stock is not overbought but still has room to move higher if buying pressure increases. When the RSI has approached 70 in the past, the stock has faced some resistance, leading to pullbacks. On the flip side, when RSI dipped closer to 30, it signaled buying opportunities.
Right now, RSI suggests that the stock has momentum but isn’t stretched too far in either direction. This means investors are watching for confirmation of the next move.
Recent Price Action
Looking at the most recent candles, there are a few notable observations:
- The last five trading sessions have shown higher lows, meaning the stock is grinding higher rather than making sharp moves.
- Wicks on the upside suggest some selling pressure, but not enough to push the stock significantly lower.
- The price recently bounced off the 50-day moving average and is now testing prior highs.
These signs indicate that buyers are stepping in, but there is some hesitation at these levels, likely due to past resistance. If the stock breaks above recent highs with strong volume, it could signal another leg higher. Conversely, if it struggles to hold, a pullback to the 50-day or 200-day moving averages could be in play.
Analyst Ratings
📊 Cencora, Inc. (NYSE: COR) has recently received mixed analyst evaluations, balancing both optimism and caution. As of March 2025, the stock holds a Moderate Buy consensus from analysts, with a breakdown of eight buy ratings and two hold ratings. The average 12-month price target sits at $277.90, suggesting moderate upside potential from current levels.
🔼 Upgrades
Several analysts have expressed confidence in Cencora’s growth trajectory:
📈 UBS raised its price target from $275 to $285 on November 7, 2024, maintaining a buy rating. The firm cited strong financial performance and positive industry trends, noting that Cencora’s role in pharmaceutical distribution remains solid.
📈 Barclays followed with an upgrade on the same day, lifting its target from $263 to $290 while reiterating an overweight rating. Analysts at Barclays believe Cencora is well-positioned to capitalize on long-term demand for pharmaceutical services.
📈 Evercore ISI Group reinforced an outperform rating on February 6, 2025, reflecting continued confidence in operational efficiencies and strategic growth initiatives. Analysts noted that the company’s fundamentals remain strong, justifying their bullish stance.
🔽 Downgrades
On the other side, some analysts have taken a more cautious approach:
⚠ Bank of America Securities downgraded Cencora from buy to neutral on September 18, 2024, while adjusting the price target downward from $275 to $245. The firm expressed concerns over valuation and sector-wide headwinds, suggesting that much of the near-term growth may already be priced in.
⚠ Wells Fargo maintained an equal-weight rating on December 13, 2024, but revised its target down from $249 to $237. Analysts pointed to potential margin pressures and uncertainties in regulatory policies, signaling a need for caution despite the company’s stability.
The mixed ratings reflect both confidence in Cencora’s long-term strength and caution about near-term valuation risks. Investors will likely watch earnings reports and industry trends closely to gauge the next move.
Earnings Report Summary
Cencora, Inc. (NYSE: COR) recently released its first-quarter earnings for fiscal year 2025, covering the period ending December 31, 2024. The company showed solid revenue growth, bringing in $81.5 billion, which is a 12.8% increase from the same quarter last year. That’s a strong number, showing that demand for Cencora’s pharmaceutical distribution services remains high.
Earnings were a bit of a mixed bag. On a GAAP basis, diluted earnings per share (EPS) came in at just $0.02, a steep drop from $1.72 in the previous year’s quarter. However, when adjusting for special items, adjusted EPS jumped 16.8% to $3.34, highlighting the company’s ability to manage costs and maintain profitability despite some one-time expenses.
A big part of Cencora’s growth came from its U.S. Healthcare Solutions segment, which saw revenue climb 15.7% to $67.2 billion. The strong numbers were fueled by increased sales of diabetes and weight-loss drugs, along with higher demand for specialty medications used in hospitals and physician offices. Meanwhile, International Healthcare Solutions contributed as well, posting a 5.5% revenue increase to $7.1 billion, thanks to stronger sales in key global markets.
On the profit side, gross profit rose 6.5% to $2.4 billion, with most of the gains coming from the U.S. healthcare segment. However, operating expenses also went up, climbing 9% year-over-year, driven by higher distribution and legal costs. The company had to set aside funds for opioid-related litigation expenses, which weighed on overall profitability.
Operating income came in at $672.5 million, about the same as last year. While the revenue growth was impressive, higher costs offset some of those gains. The operating margin dipped slightly to 0.91%, showing that the company is still working to balance growth with rising expenses.
On the financial side, interest expenses dropped by nearly 46%, helped by higher cash balances and reduced borrowing costs. The company also reported a slightly higher tax rate of 22.4%, up from 21.3% in the previous year.
Overall, the numbers paint a picture of a company that’s growing steadily, especially in the U.S. market. While rising expenses and legal costs remain a challenge, Cencora continues to show it can adapt and maintain strong financial performance heading into the rest of the year.
Financial Health and Stability
Cencora operates in a high-volume, low-margin industry, which means financial stability is key. The company has a strong revenue base and solid institutional support, but there are a few areas that investors should keep an eye on.
Strengths
✔ Revenue is growing steadily, with a 12.8% year-over-year increase, showing strong demand for its services.
✔ Profit margins, while thin, remain consistent within industry norms.
✔ Institutional ownership is high, with over 92% of shares held by major investors, indicating confidence in the company’s long-term potential.
Concerns
⚠ High debt levels could be a challenge, with $9.73 billion in total debt and a debt-to-equity ratio of 2,689%.
⚠ Negative free cash flow raises questions about the company’s ability to fund dividends and reinvest in the business simultaneously.
⚠ Low operating margins mean even minor disruptions in drug pricing or supply chain costs could significantly impact profitability.
Cencora’s financials are a mix of strengths and risks. While its revenue and institutional backing inspire confidence, the company’s leverage and cash flow position are worth monitoring.
Valuation and Stock Performance
Cencora’s stock has been on an upward trend, closing at $253.77 as of March 6, 2025. The stock has outperformed the broader market, reflecting investor optimism about its future growth.
Valuation-wise, the stock trades at a trailing price-to-earnings (P/E) ratio of 36.0, which is on the high side. However, the forward P/E of 16.56 suggests that analysts expect earnings growth to justify the current price. The price-to-sales ratio of 0.17 also reflects the nature of the distribution business, where revenues are massive but margins are slim.
For investors looking for a bargain, Cencora may not be the most compelling option at its current valuation. However, those who focus on long-term earnings growth rather than short-term discounts may still find it appealing.
Risks and Considerations
Like any investment, Cencora has its share of risks. Investors should consider the following before making any decisions:
1️⃣ Debt Levels – The company carries a significant amount of debt. While it has managed to service this debt effectively, any increase in borrowing costs or economic downturns could put pressure on its financial flexibility.
2️⃣ Profit Margins – Operating at a margin below 1% means there’s little room for error. If expenses rise or revenue slows, profitability could take a hit.
3️⃣ Cash Flow Concerns – While earnings remain strong, negative free cash flow is something to watch. If this trend continues, it could limit the company’s ability to expand or return capital to shareholders.
4️⃣ Regulatory Risks – As a pharmaceutical distributor, Cencora is subject to government regulations that could impact pricing, supply chain costs, or legal liabilities. Any major changes in healthcare policies could affect its operations.
5️⃣ Lower Yield – At 0.87%, the dividend yield is relatively low. While growth-oriented investors might find it attractive, those seeking higher immediate income may look elsewhere.
Final Thoughts
Cencora is a well-established company with a strong position in the pharmaceutical distribution industry. For dividend investors, it offers a compelling mix of stability and growth, though it’s not a high-yield play. The company’s history of consistent dividend increases, combined with a low payout ratio, suggests that dividends will continue to grow over time.
That said, investors should be mindful of its high debt levels and cash flow situation. While the company has performed well, financial flexibility is key for long-term sustainability. For those who prioritize dividend growth over immediate yield, Cencora could be a solid addition to a well-diversified portfolio. However, income-focused investors seeking higher yields may want to explore other options.
Ultimately, Cencora’s dividend strategy is about long-term reliability rather than short-term payouts. Investors who appreciate steady dividend growth and a business model tied to a crucial industry may find this stock worth considering.
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