Contemplating the Purchase of a Rapidly Expanding Dividend Share?
UnitedHealth Group, one of the world's largest health insurers, reported strong financial results for the second quarter of 2022. The company's revenue reached an impressive $80.3 billion, marking a 12.6% year-over-year growth. This growth was driven by a variety of factors, including growth in its customer base, premium hikes, a more favorable business mix, and a higher revenue base.
The company's customer base also saw an increase, with Optum Health serving 2% more customers year-over-year, totalling 101 million. UnitedHealthcare's total medical customer base grew by 3.3% year-over-year to 51.2 million.
UnitedHealth Group's adjusted diluted EPS for Q2 2022 was $5.57, representing an 18.5% year-over-year growth. The company's net margin for the quarter was 6.3%, a 30 basis points increase from the previous year.
In June, UnitedHealth Group announced a 13.8% hike in its dividend, a move that is expected to be followed by many more double-digit percentage dividend increases. Despite a lower dividend yield, UnitedHealth Group's dividend safety and strong growth potential make up for it.
However, the company's financial performance in 2025 has shown some challenges. Although revenue continues to grow, operational earnings and net margins have declined compared to earlier periods. The company experienced higher medical costs surpassing pricing trends, impacting profitability.
Regarding dividends, UnitedHealth has a history of dividend payments and increases but faced recent challenges. Its dividend yield is now above 3%, following a share price decline related to poorer-than-expected earnings and lowered guidance.
Comparing UnitedHealth Group to the S&P 500 and the healthcare plan industry, the company has historically been a strong performer. However, recent soft earnings and outlook revisions have underperformed typical S&P 500 returns in the near term. The S&P 500, on average, has much lower dividend yields but more stable earnings forecasts currently.
In the healthcare plan industry, UnitedHealth is a leader by revenue and scale. However, it is currently facing industry-wide pressures from rising medical costs and pricing challenges. Its earnings outlook in 2025 is more cautious than previously expected, which contrasts with stronger or steadier earnings growth seen in some healthcare competitors or subsectors.
Regarding the potential for generating double-digit annual total returns going forward, recent developments suggest caution. UnitedHealth's earnings guidance was lowered significantly for 2025, indicating a challenging year with efforts to "rigorously" improve operations and return to growth in 2026. The lowered expectations and share price decline reflect near-term risks, making it a potentially less attractive investment for immediate double-digit total returns. However, management's focus on operational discipline and expected earnings growth in 2026 may offer longer-term upside if executed successfully.
In summary, UnitedHealth Group currently faces short-term earnings and margin pressures relative to its past performance and broader market benchmarks. While it has a strong business model and leadership in the healthcare plan industry, the recent guidance suggests it may not be positioned to deliver double-digit annual total returns immediately but could have a recovery path depending on future execution and market conditions.
[1] CNBC. (2022, August 2). UnitedHealth Group Q2 earnings beat expectations as revenue jumps 12.6%. CNBC. https://www.cnbc.com/2022/08/02/unitedhealth-group-q2-earnings-2022.html
[2] Yahoo Finance. (2022, July 19). UnitedHealth Group (UNH) Q2 2022 Earnings Call Transcript. Yahoo Finance. https://finance.yahoo.com/news/unitedhealth-group-unh-q2-2022-earnings-173000586.html
[3] The Motley Fool. (2022, August 2). UnitedHealth Group Q2 2022 Earnings Call Transcript. The Motley Fool. https://www.fool.com/earnings/call-transcripts/2022/08/02/unitedhealth-group-unh-q2-2022-earnings-call-transcript/
[4] Yahoo Finance. (2022, August 2). UnitedHealth Group Dividend Date & History. Yahoo Finance. https://finance.yahoo.com/quote/UNH/dividend?p=UNH
- UnitedHealth Group's Q2 2022 revenue growth was driven by various factors, including investing in acquiring more customers and technology, which contributed to the 12.6% year-over-year increase.
- In 2025, UnitedHealth Group faced challenges in maintaining its net margins and operational earnings due to increased medical costs, a situation that could affect its future finance and investing strategies.
- Despite its recent slip in earnings and dividend yield, UnitedHealth Group's history, leadership in the healthcare plan industry, and management's focus on operational discipline make it a potentially attractive long-term finance investment for those seeking returns.
