UnitedHealth is Near its 52-Week High. Wall Street Is Starting to Notice This Blue Chip Stock -- and So Should You.

Shares of UnitedHealth Group (NYSE: UNH) are up 25% this year and are still trading near its 52-week high. The healthcare giant's stock offers a good combination of revenue growth, a solid dividend, and strong insulation against economic downturns.

The company has bounced back significantly after it had a bad earnings miss and suspended guidance in April 2025, a move that was followed by the resignation of then-CEO Andrew Witty.

Here are reasons why the stock remains a good buy.

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It's a great dividend stock

UnitedHealth Group just raised its dividend by 5% to $2.32 per quarterly share, marking 17 consecutive years of raises, and at the stock's current price, it yields around 2.3%.

The dividend increase shows the company is confident in its ability to handle rising medical costs and other changes. The company produced $19.7 billion in operating cash flow in 2025, equal to 1.5x net income. Cash from operations has consistently exceeded net income.

The stock is a solid choice for total-return and income-focused investors. The company generates massive, highly reliable free cash flow that supports aggressive share buybacks, as it expects to repurchase $2 billion in shares by the end of the second quarter and to maintain a consistently growing dividend.

Two segments balance the business

Unlike pure-play health insurers, UnitedHealth Group operates a highly resilient, diversified model split into two powerhouse segments. One is UnitedHealthcare, its huge insurance arm that served 49.1 million people in the first quarter, including individuals, employers, and government programs.

The other is Optum, its health services business that provides pharmacy benefits, data analytics, and direct patient care to more than 123 million people.

In the first quarter, the UnitedHealthcare side was driving its business. The company reported overall revenue of $111.7 billion, up 2% year over year, with UnitedHealthcare reporting $86.3 billion, up 2% from the first quarter of 2025. Earnings per share (EPS) were $6.90, up less than 1% compared to the same period a year ago, and earnings from UnitedHealthcare again were the catalyst, with earnings from operations of $5.7 billion, up 9%, year over year.

It is still selling at an attractive valuation

Though UnitedHealth Group's shares have risen more than 25% this year, its shares are still trading at around 31 times earnings and around 22 times future earnings.

The advantage of healthcare stocks is that people need medical care regardless of the state of the economy. Concerns about rising costs combined with no reimbursement raises on the way for 2027 have compressed the company's valuations into reasonable territory compared to its historical averages and put it in a good position compared to its nearest competitors.

It has strong pricing power that reacts to change

UnitedHealth Group's medical cost ratio was 83.9% for the first quarter, down 90 basis points from the same period a year ago. That's the good news. The bad news is that medical cost ratios have been increasing for insurers over the past several years, due to changes under the Affordable Care Act, the rising number of older adults seeking medical care, the rising costs of diabetes and weight-loss medications, and medical advancements tied to high-cost medical devices.

UnitedHealth has a clear playbook for managing the recent industrywide spike in medical utilization. Because commercial plans renew continuously throughout the year, management has already begun implementing a strongly responsive pricing strategy. In its Medicare Advantage plans, the company is adjusting premium pricing, streamlining provider networks, and utilizing advanced tools to filter unnecessary clinical costs. That's a key point because UnitedHealth is the largest Medicare Advantage provider, serving more than 8 million people. In April, CMS finalized a 2.48% payment increase for 2027 Medicare Advantage plans, which was more than what was initially proposed, but doesn't solve long-term price concerns, industry executives said.

The company is using AI to trim administrative costs

UnitedHealth Group has launched a massive $1.5 billion enterprise-wide artificial intelligence (AI) initiative. By transitioning traditional, fractured processes to AI-first operations, management expects a 2-to-1 return on investment, translating into nearly $1 billion in direct operating-cost reductions.

The company is deploying artificial intelligence across three core operational fronts to aggressively defend and expand its operating margins. It is using generative AI to handle the first point of contact, reducing the need for expensive call center networks.

Launched in March, its digital companion Avery is a generative AI assistant handling inquiries for employers and Medicare Advantage members. It is set up to resolve complex questions about coverage limits, claim status, and copay estimates instantly. By migrating member navigation to self-service AI, UnitedHealth has already reduced call center volume by 25% as of the first quarter, eliminating significant structural overhead.

It is also using AI to simplify and speed up prescription approval times from eight hours to under 30 seconds and considerably drop processing costs. The company sees its AI engine as not only saving money but also, when outsourced, adding revenue.

About a third of UNH's $1.5 billion AI spend is dedicated to transforming OptumInsight into an AI-first software firm. The data analytics, payment integrity, and fraud-detection models trained internally on UNH's massive data pool are being packaged and sold directly to other hospital networks and insurers, turning an internal cost-saver into a high-margin revenue stream.

James Halley has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.