3/8/25
Elevance Health, formerly known as Anthem, is a major player in the health insurance industry. It operates under the well-known Blue Cross Blue Shield brand and serves millions of Americans through government-sponsored healthcare programs, employer-based plans, and Medicare and Medicaid offerings. Over the years, the company has expanded beyond traditional insurance, moving into value-based care and other healthcare solutions.
For dividend investors, ELV offers a balance of steady income and long-term growth potential. While it’s not a high-yield stock, it has a history of increasing its payouts consistently, making it an attractive option for those looking for reliable dividend growth.
Key Dividend Metrics
🟢 Dividend Yield: 1.70%
🟢 Annual Dividend Payout: $6.84 per share
🟢 5-Year Average Dividend Yield: 1.18%
🟢 Payout Ratio: 25.39% (Well-covered by earnings)
🟢 Dividend Growth Rate (5-Year CAGR): Around 14%
🟢 Ex-Dividend Date: March 10, 2025
🟢 Next Payment Date: March 25, 2025
🟢 Last Dividend Increase: 5% in 2024
Dividend Overview
Elevance Health may not be the first name that comes to mind for income-seeking investors, but it has quietly built a strong dividend track record. With a current yield of 1.70%, it’s paying out more than its historical 5-year average of 1.18%, which could make it an attractive entry point.
What stands out most is its low payout ratio of 25.39%. This means the company is using only a small portion of its earnings to cover dividends, leaving plenty of room for future increases. The latest dividend hike was about 5%, slightly lower than previous years, but still a positive sign that management remains committed to rewarding shareholders.
Dividend Growth and Safety
One of ELV’s strongest qualities is its history of dividend growth. Over the past five years, the company has raised its dividend at an average rate of around 14% per year. This is well above inflation and suggests that investors can expect continued raises as long as earnings remain strong.
A few key factors highlight the safety of ELV’s dividend:
✅ A low payout ratio means dividends are well-supported by earnings
✅ Strong cash flow generation, with $5.81 billion in operating cash flow in the past year
✅ A steady business model focused on essential healthcare services
The healthcare sector tends to be more stable than other industries, which adds another layer of security for dividend investors. Even in economic downturns, people still need health insurance, making ELV’s revenue stream relatively resilient.
Chart Analysis
Price Action and Trend
The stock has been in a clear downtrend for several months, with a sharp decline that started around late September or early October. The price has since attempted to stabilize, showing some signs of recovery in recent weeks. However, it remains well below the 200-day moving average, which is still trending downward. The 50-day moving average, though also in a downtrend, appears to be flattening out, suggesting that downward momentum may be slowing.
Moving Averages
The 50-day moving average is sitting below the 200-day moving average, confirming a bearish trend. The gap between the two remains significant, but the recent price action suggests the stock could be working on a potential base. If the price can break above the 50-day moving average and hold, it would be an early sign that momentum is shifting. However, with the 200-day moving average still sloping downward, any rally could face resistance at higher levels.
Volume and Market Participation
Volume has been relatively steady, though there was a major spike in October, likely signaling a period of capitulation where sellers aggressively exited positions. Since then, volume has returned to more normalized levels, with some increased buying activity in the last several weeks. This suggests that investors are stepping in at these lower prices, but there hasn’t been a definitive surge in demand to confirm a full reversal just yet.
Relative Strength Index (RSI)
The RSI has been recovering from oversold conditions and is now moving higher. This indicates that momentum is improving, but it has yet to reach overbought levels, meaning there could still be room for further upside before the stock faces strong resistance. A continued rise in RSI would support the case for a near-term rally, but if it stalls or reverses, it could indicate that selling pressure is still present.
Key Levels to Watch
The recent price movement suggests that $400 is acting as a key psychological level, with the stock bouncing around this area. A sustained move above this level could open the door for a test of resistance near $425–$430, where the 50-day moving average is hovering. On the downside, if selling resumes, support around the recent lows in the $360–$370 range would be critical to hold.
Analyst Ratings
🟢 Upgrades:
📈 Barclays: On January 24, 2025, Barclays raised its price target for Elevance Health from $501 to $512 while maintaining an overweight rating. The firm cited confidence in the company’s ability to navigate healthcare sector challenges and maintain strong earnings growth.
📈 Cantor Fitzgerald: Cantor Fitzgerald reiterated its overweight rating on the stock on January 24, 2025, keeping a price target of $485. Analysts highlighted Elevance Health’s ability to generate consistent cash flow and its defensive positioning in the healthcare industry.
🔴 Downgrades:
📉 Argus Research: On October 18, 2024, Argus Research downgraded Elevance Health from a buy to a hold. The downgrade likely reflects concerns over valuation after a strong multi-year run, with analysts suggesting limited upside potential in the near term.
📉 Stephens Inc.: On January 22, 2025, Stephens moved the stock from overweight to equal weight, lowering its price target from $520 to $440. Analysts pointed to increased competition in the healthcare sector and regulatory uncertainties that could impact earnings.
📊 Consensus Price Target:
The average 12-month price target for Elevance Health among analysts currently sits at $485.13, representing a potential upside of approximately 24.24% from the current share price. Targets vary widely, with the most optimistic forecast at $625 and the lowest estimate at $405, reflecting differing opinions on the company’s ability to drive future growth.
🔍 These mixed ratings suggest that while some analysts see value in the stock’s long-term potential, others are taking a more cautious approach based on short-term risks.
Earning Report Summary
Elevance Health’s latest earnings report gives investors plenty to think about. The company posted solid revenue growth in the fourth quarter of 2024, bringing in about $45 billion, which was up 6% from the previous year. This increase was fueled by stronger premium growth in its health benefits business and more revenue from CarelonRx. Adjusted earnings per share came in at $3.84, slightly beating expectations of $3.80.
One number that stood out was the medical loss ratio, which rose to 92.4% from 89.2% a year ago. This means the company is spending a little more on medical costs, particularly in its Medicaid business. However, it was still better than what analysts were expecting, showing that cost controls remain in place.
Looking at the full year, Elevance Health pulled in $175.2 billion in revenue, staying in line with growth expectations. Adjusted earnings per share reached $33.04, a strong result given the economic environment.
Breaking it down by business segments, the Health Benefits division, which includes employer-sponsored plans, Medicare, and Medicaid, generated $37.6 billion in revenue for the quarter, growing 3% year-over-year. Medicaid enrollment took a hit as people lost eligibility due to policy changes, but that was partially offset by growth in employer-based plans and Affordable Care Act enrollments.
The Carelon segment was the big winner, with revenue jumping 19% to $14.7 billion. The acquisition of Paragon Healthcare and expansion of its pharmacy benefits business played a big role in that growth.
Membership numbers showed a slight decline, with total enrollment at 45.8 million by the end of the year, down by about 1.1 million members. Most of this came from Medicaid losses, but gains in other areas helped soften the blow.
On the cash flow front, the company brought in $2.7 billion in the fourth quarter, showing strong financial stability. They also returned cash to shareholders by buying back stock and increasing the dividend. The latest dividend hike was 5%, pushing it up to $1.71 per share.
Looking ahead, Elevance Health expects earnings per share for 2025 to land between $30.40 and $31.10 on a GAAP basis, with adjusted earnings ranging from $34.15 to $34.85. Revenue is projected to grow around 8%, suggesting the company remains confident in its long-term strategy.
Financial Health and Stability
A solid balance sheet is crucial for a company’s ability to sustain and grow its dividend. Here’s how ELV stacks up financially:
- Total Cash: $34.68 billion, providing strong liquidity
- Total Debt: $34.35 billion, which is manageable given its cash flow
- Debt-to-Equity Ratio: 82.91%, slightly high but common for insurers
- Return on Equity: 14.77%, reflecting strong profitability
- Profit Margin: 3.38%, typical for the insurance industry
With over $34 billion in cash, ELV has plenty of financial flexibility. The debt level is something to keep an eye on, but as long as the company continues generating healthy cash flow, it shouldn’t be a major concern.
Valuation and Stock Performance
Right now, ELV looks reasonably priced compared to its historical valuation. It trades at a trailing P/E of 15.68 and a forward P/E of 11.67, suggesting that the market expects earnings to grow. The PEG ratio of 0.88 indicates that the stock could offer good value based on its projected growth.
- 52-Week Range: $362.21 – $567.26
- Current Price (After-Hours on March 7, 2025): $400.00
- 50-Day Moving Average: $388.98
- 200-Day Moving Average: $466.74
The stock has pulled back about 19.92% from its 52-week high, underperforming the broader market. While some investors may view this as a red flag, it also means the dividend yield is slightly more attractive than usual. If ELV continues its trend of earnings and dividend growth, this dip could turn into an opportunity for long-term investors.
Risks and Considerations
Like any investment, ELV comes with some risks that investors should be aware of:
🚩 Regulatory Changes – The healthcare industry is highly regulated, and changes in government policies could impact ELV’s business.
🚩 Profit Margins – Operating margins are relatively tight at 2.17%, meaning cost pressures could affect earnings.
🚩 Debt Levels – While manageable, ELV’s debt-to-equity ratio is on the higher side, which could become an issue if borrowing costs rise.
🚩 Earnings Volatility – The most recent quarter showed a year-over-year earnings decline of 51.20%, which could indicate near-term challenges.
None of these factors are immediate deal-breakers, but they’re worth keeping in mind when considering the stock for a dividend portfolio.
Final Thoughts
Elevance Health has built a solid reputation for delivering steady dividend growth while maintaining strong financial health. With a low payout ratio, a history of increasing dividends, and a defensive business model, it remains a reliable option for long-term dividend investors.
The recent stock price weakness could make it a more attractive entry point for those willing to hold through short-term fluctuations. While there are some risks, ELV’s financial strength and consistent dividend growth suggest that patient investors will likely continue to see rising payouts in the years ahead.
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