These 3 Dividend Stocks Yield Less Than 10-Year Treasuries Over 5%. Here's Why They Are Better Buys Anyway.

CVS Health, Abbott Laboratories, and UnitedHealth Group offer dividend yields of roughly 3.0%, 2.5%, and 2.4%, respectively, below the 10-year Treasury yield of more than 5.2%, but each is positioned as a dividend-growth alternative with potential capital appreciation. CVS beat Q2 2026 EPS and revenue expectations, while Abbott beat Q2 estimates and raised full-year EPS guidance; Abbott has raised its dividend for 54 consecutive years and UnitedHealth for 17 years. Consensus analyst high-price targets imply approximately 45% upside for CVS, 43% for Abbott, and 42% for UnitedHealth, though the thesis relies on long-term dividend growth and target-price realization rather than current income.

Analysis

The relevant valuation question is not dividend yield versus Treasuries, but whether each issuer can grow free cash flow per share faster than the risk-free rate while preserving payout capacity. CVS has the greatest rerating potential because its multiple embeds persistent Medicare Advantage cost pressure and weak Retail/LTC economics; incremental evidence of a normalized medical-loss ratio or successful cost takeout could drive a sharp 1-3 month revision cycle. Conversely, its dividend is not the catalyst—deleveraging and credible cash conversion are, and any renewed pressure on reimbursement or 340B-related pharmacy economics would keep the equity-value discount intact.

UNH remains the highest-quality asset but likely has the least asymmetric upside from a generic “defensive dividend” narrative. The market will price the stock off utilization trend, Medicare Advantage rate adequacy, Optum growth, and regulatory exposure—not its payout growth; a stabilization in medical-cost trend could support a 6-18 month multiple recovery, while adverse findings or reimbursement proposals would create a materially different downside regime. A long UNH funded by a short more rate-sensitive healthcare-services exposure is preferable to outright beta if the objective is to isolate normalization of managed-care margins.

ABT is the cleaner duration asset: recurring diagnostics and broad device exposure make it less exposed to US payer utilization than CVS/UNH, but the key swing factor is organic growth and margin mix rather than dividend history. The contrarian point is that elevated Treasury yields do not automatically make these equities unattractive; they raise the required hurdle for a rerating, so only company-specific earnings revisions—not analyst target prices—can close the valuation gap. This is routine, low-impact sentiment unless upcoming results demonstrate cash-flow and guidance inflection.

Key Decisions for Investors

• Watchlist CVS for a post-earnings long rather than buy on yield: initiate only if management reaffirms or raises 2027 medical-cost and free-cash-flow expectations while showing sequential improvement in Health Care Benefits margins. Target a 3-6 month rerating trade; exit if medical-loss-ratio guidance deteriorates or debt reduction falls short of plan.
• Express managed-care normalization through a 6-12 month long UNH / short IHF pair, sized beta-neutral, only after confirming that utilization trend has stopped worsening. The thesis is Optum diversification and earnings durability versus broad insurer exposure; falsify on a negative Medicare Advantage reimbursement development, regulatory escalation, or another material UNH guidance reset.
• Prefer ABT as the lower-volatility healthcare allocation over yield-oriented CVS/UNH for a 6-18 month horizon, but add only on evidence that organic sales growth and operating leverage are accelerating. Key risk is a growth miss in diagnostics or devices that prevents the expected quality multiple from expanding while real yields remain elevated.
• Do not underwrite any position to published high-price targets. Set an alert around next earnings for revisions to EPS, free cash flow, medical-cost assumptions, and capital-return plans; absent upward estimate revisions, retain neutral exposure to the group.