Is UnitedHealth Still a Good Dividend Stock?

UnitedHealth Group (UNH) stock has declined 28% in 2025 (as of Oct 20) amid rising costs, missed earnings, a CEO change, and a DOJ investigation into billing practices. Despite these pressures, the company generated $21.3 billion in profit over the trailing 12 months and increased its quarterly dividend by 5% to $2.21, supported by a healthy 37% payout ratio and offering a 2.5% yield. The article posits that UNH remains a strong long-term buy on weakness, citing robust financials capable of managing current headwinds and an expectation that high utilization rates and costs will eventually normalize.

Analysis

UnitedHealth Group (UNH) shares have experienced a significant decline of 28% in 2025 as of October 20, driven by several operational and regulatory pressures. These include rising costs, a wide miss on July earnings expectations, a recent CEO change, and a Department of Justice investigation into billing practices. This confluence of negative factors has led to an unusually high dividend yield for the stock.

Despite these headwinds, UNH demonstrates robust underlying financial health, reporting $21.3 billion in profit over the trailing 12 months. The company maintained its commitment to shareholders by raising its quarterly dividend by over 5% to $2.21, supported by a healthy 37% payout ratio. This indicates strong cash flow generation and management's confidence in future profitability.

The increase in costs, particularly the medical care ratio rising to 89.4% from 82.5% in 2019, is attributed to inflation and higher post-pandemic utilization rates for procedures. Management anticipates these utilization rates will normalize over time, leading to a reduction in the medical care ratio and overall costs. The stock's current 2.5% dividend yield significantly surpasses the S&P 500's average of 1.2%, and its 15x P/E multiple suggests a modest valuation.

Key Decisions for Investors

• Investors should evaluate UNH's current valuation, including its 2.5% dividend yield and 15x P/E multiple, as a potential long-term entry point given the recent 28% stock decline.
• Monitor future earnings reports for signs of cost containment and normalization of utilization rates, which are key to improving the medical care ratio from its current 89.4%.
• Consider the ongoing Department of Justice investigation and its potential impact, while acknowledging the company's strong trailing 12-month profit of $21.3 billion and healthy 37% payout ratio supporting dividend growth.