Dividend stocks can generate significant long-term returns for your portfolio by allowing you to benefit from a rising valuation while collecting recurring cash flow along the way. But not every dividend stock is the same -- and very few are great. Before you invest in an income-generating stock for the long term, you need to consider multiple factors.

Not only is it important to assess the strength of the business, but you should also consider whether the company can afford to keep paying its dividend for the foreseeable future. Also note whether the rate it pays today is better than most stocks, and whether it's likely to grow its payouts over the years. Today, I'll look at how CVS Health (NYSE:CVS) performs on these different metrics, and determine whether it's a great dividend stock that you can safely put in your portfolio for decades.

Is the business in good shape?

The coronavirus pandemic has been a big test for nearly every business this year, and CVS is one that has adapted well to the adversity. On Nov. 6, the Rhode Island-based company released its third-quarter results for the period ending Sept. 30. Sales of $67.1 billion grew by 3.5% year over year, and year-to-date revenue of $199.2 billion was up by 4.9%. Net income for the quarter fell by 20% to $1.2 billion, but over the past nine months, the company's profits of $4.9 billion have been more than three times last year's $1.3 billion.One of the ways CVS has adapted to the COVID-19 crisis is by opening over 4,000 testing sites. The company says that it's conducted more than 6 million COVID-19 tests thus far.

Pharmacist wearing a surgical mask.

Image source: Getty Images.

In addition, CVS now offers telehealth video visits starting as low as $59 per visit, available all year, 24 hours a day. The company has been doing a great job of adapting to the coronavirus pandemic, and its numbers indicate that the business is still performing well amid these challenges. That makes CVS a safe investment to hang on to for the long term.

Where the dividend is today

If a business is stable, its dividend payouts are likely to remain safe. Today, CVS pays its shareholders a quarterly dividend of $0.50 that yields just over 3% -- better than the 2% payout that investors can expect from the average S&P 500 stock. On a $25,000 investment, that 3% payout would generate $750 in annual revenue for your portfolio. 

In each of the past four quarters, CVS has generated free cash flow of $12.6 billion -- well above the $2.6 billion that it's paid out in dividends during that time. There's ample room for CVS to continue supporting the dividend, and investors have no reason to worry about a cut or suspension. However, simply paying a safe and sustainable dividend won't be enough to make the company's dividend great. It also needs to increase those payouts.

Does CVS grow its dividend?

The last time CVS increased its dividend was in 2017. Although it certainly has room in its budget to do so, the company hasn't made a move to boost its quarterly payments in three years, and it may not do that anytime soon. That's because CVS is busy converting 1,500 of its locations into HealthHubs, which provide customers and patients with additional healthcare services including chronic treatment care and access to wellness rooms. That will require capital spending in the near future, and this combined with the uncertainty related to the coronavirus pandemic could give executives plenty of reason to hold off on making any changes to the payout right now.

At this point, there's little reason to expect that CVS's dividend will increase in the coming years. In fact, it likely won't until the economy is in a much stronger position.

CVS is a good dividend stock, but it isn't great

Although CVS has a better-than-normal payout, that's not enough to classify it as a "great" dividend stock. For it to be great, investors should be able to buy it and forget about it, and watch their dividend payments rise over the years. Without an expectation that the dividend will rise, long-term investors may be better off looking at other dividend stocks to add to their portfolios instead of CVS.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.