Forget UnitedHealth. Cardinal Health Is the Best Healthcare Stock to Buy Right Now

UnitedHealth Group (NYSE:UNH) has faced severe headwinds in 2025, with its stock plummeting over 50% from its April high. This decline was driven by a rare first-quarter earnings miss, a Justice Department investigation into Medicare fraud, and CEO Andrew Witty’s abrupt resignation. The resignation came amid rising medical costs and public backlash following the December murder of executive Brian Thompson.

Despite these setbacks, the country’s largest health insurer has a diversified business model and a 15-year  track record of dividend growth that still make it a potential long-term hold for patient investors. 

However, investors have a better healthcare stock to buy today that doesn’t come with any baggage. Medical products distributor Cardinal Health (NYSE:CAH) currently makes a stronger case for investment now. 

Operating in a distinct healthcare niche, CAH capitalizes on industry trends such as aging populations and drug demand, providing stability and growth without UNH’s regulatory risks, making it an attractive alternative for 2025.

Why CAH Stock Is One to Buy Now

Cardinal Health, trading at $153 per share, is near its all-time high of $156 and is a compelling investment as it leverages healthcare industry tailwinds, strong financials, and a reliable dividend. 

As a leading distributor of pharmaceuticals and medical products, CAH serves hospitals, pharmacies, and clinics, benefiting from secular trends like an aging U.S. population with 10,000 people enrolling in Medicare each day and rising prescription drug use. According to data from analytics firm IQVIA, the number of retail and long-term care prescriptions hit 7.1 billion in 2024, up 1 billion from 2019, with net spending on medicines rising more than 11% to $487 billion. 

Unlike UnitedHealth, CAH avoids insurance-related regulatory scrutiny, offering stability amid investigations into health insurers. Earlier this month, for example, the DOJ announced it had filed three complaints against insurance companies — Aetna (NYSE:AET), Elevance Health (NYSE:ELV), and Humana (NYSE:HUM) — alleging unlawful kickbacks and discrimination against the disabled.

Riding Industry Tailwinds

Cardinal Health’s fiscal third-quarter earnings report showed adjusted revenue grew 19% to $54.9 billion and 13% adjusted earnings growth to $2.35 per share, driven by pharmaceutical distribution and generics programs. Analysts project 10% annual revenue and earnings growth through 2027, fueled by oncology drug demand and GLP-1 medications such as Novo Nordisk‘s (NYSE:NVO) Ozempic and Eli Lilly‘s (NYSE:LLY) Mounjaro. 

The distributor’s operational strengths enhance its appeal. Its distribution network, serving 90% of U.S. hospitals, ensures steady demand, insulated from tariff impacts as only 5% of products are imported. Strategic acquisitions, such as the $1.2 billion Specialty Networks deal in 2024, expand its oncology and specialty drug capabilities, boosting margins. Gross margins widened by 10% in Q3 while operating margins surged 80%.

E-commerce platforms and home healthcare services, which saw a 13% increase in sales, align with post-COVID care shifts. While competition from McKesson (NYSE:MCK) and Cencora (NYSE:COR) poses risks, CAH’s scale and contracts with major pharmacy chains like CVS Health (NYSE:CVS) secure its market share. Although inflation may raise costs, CAH’s pricing power helps mitigate margin pressure.

Dividend Track Record and Growth

Cardinal Health’s dividend is a cornerstone for income investors, yielding 1.3% annually, with a 30-year streak of uninterrupted payment increases, making it a Dividend Aristocrat. In 2024, CAH paid $2.02 per share and increased it 1% to $2.04 per share, reflecting cautious growth amid acquisitions. However, this increase is well below its five-year average of 6.3%. Still, the dividend is supported by a sustainable 22% free cash flow payout ratio, leaving room for reinvestment or future hikes. 

Cardinal Health does have some risks, including $7.1 billion in debt, but its A- credit rating ensures stability. CAH’s reliable payout and growth make it a safer income play than UnitedHealth.

Key Takeaway

Cardinal Health’s alignment with healthcare demand, operational resilience, and a stock price that still has more room for future growth make it an excellent buy near its high. Its dividend, with a strong track record and growth potential, appeals to income and growth investors, offering a less volatile alternative to UNH in 2025’s uncertain market.

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