Better Dividend Growth Stock to Buy: CVS Health or UnitedHealth Group?

CVS Health (NYSE: CVS) and UnitedHealth Group (NYSE: UNH) are two of the most widely followed healthcare stocks. Both companies are highly active in the managed healthcare space. As a result, both have also experienced some wild price action so far this year.

Earlier in 2026, both stocks were hammered by news of lower-than-expected Medicare reimbursement rates. More recently, however, following better-than-expected revisions to these rates, CVS and UnitedHealth shares have surged.

As a result, both stocks are up substantially over the past 12 months. CVS has generated a one-year total return of 50% while UNH has generated a one-year total return of 31%, both outperforming the S&P 500, which has generated a total return of 30% over this same time frame.

Looking at the long-term picture, particularly from the perspective of dividend investors, which of these two healthcare stocks offers better dividend growth? Although CVS Health offers a slightly higher dividend yield, when other criteria are considered, it's no contest. UnitedHealth Group is the stronger choice.

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Scoring dividends: CVS Health vs. UnitedHealth Group

At current prices, CVS Health has a forward dividend yield of around 2.9%. That is considerably higher than UnitedHealth's forward yield of 2.3%. However, CVS Health has UnitedHealth Group beat only in raw yield.

UnitedHealth Group is a dividend growth machine, with 16 years of annual increases under its belt. CVS Health, on the other hand, hasn't raised its dividend in over two years. When it comes to annualized dividend growth, UnitedHealth Group stands out even further. In the last 10 years, annual dividend growth has averaged 16.6%. CVS Health's annual dividend growth during this time frame has averaged just 6.63%.

That said, while UnitedHealth Group has increased its dividend at a considerably higher clip over the past year, dividend growth could slow over time. Based on last year's earnings, UnitedHealth Group has a payout ratio of 66.5%, or nearly two-thirds of annual earnings. CVS Health technically has a much higher payout ratio, at a staggering 116.7%.

However, this is largely the result of some one-time asset write-downs. Analysts expect CVS Health to earn around $7.43 per share this year. This suggests that CVS' $2.66 per share in annual cash dividends are well covered by earnings.

The verdict, with a caveat

In terms of dividend growth metrics alone, UnitedHealth Group is the clear winner in this matchup of health insurance stocks. Even if the company's growth slows, it's only a matter of time before it starts to outpace CVS Health on raw yield, not to mention most other metrics as well. Nevertheless, taking a holistic view of both stocks, you may want to consider CVS' potential to deliver higher total returns, especially in the years ahead.

CVS and UnitedHealth have recently reported stronger-than-expected quarterly results and guidance. However, with CVS Health shares trading for just 12.5 times forward earnings, I believe the stock has substantial rerating potential as well.

If results continue to improve and the market further appreciates that CVS is more than just a pharmacy chain, the stock may have the potential to expand its multiple modestly. On the other hand, valuation concerns could weigh on UnitedHealth, which trades for 21 times forward earnings.

UnitedHealth has historically traded at a premium valuation. Still, even if it doesn't experience multiple compressions, multiple expansions may prove challenging and could impact appreciation potential in the years ahead.

Thomas Niel has positions in UnitedHealth Group. The Motley Fool recommends CVS Health and UnitedHealth Group. The Motley Fool has a disclosure policy.