By its very nature, dividend growth investing tends to help investors focus on world-class businesses. That's because only businesses with competitive advantages in growing industries are able to steadily pay out more income to shareholders over the long haul.

The mega-cap health insurer UnitedHealth Group (UNH -4.90%) is one stock that has the potential to deliver ever-higher dividends to its shareholders. What makes this the case? And why do I believe the stock is a buy right now? Let's dig into UnitedHealth Group's fundamentals and valuation to find out.

A patient and doctor meet for an appointment.

Image source: Getty Images.

The leader in a growing industry

As medical costs continue to rise and chronic medical conditions become more common, health insurance will become an even more important product to countless customers. This is precisely why market research firm Allied Market Research expects that the global health insurance market will compound 9.7% annually from $1.98 trillion in 2020 to $4.15 trillion by 2028. 

As the largest health insurer in the world, there's no company that will benefit more from this trend than UnitedHealth.

Recent results speak volumes

The encouraging growth prospects of the health insurance industry and UnitedHealth's quality explain why the company did so well in its latest results. For the fourth quarter, the company reported $73.74 billion in total revenue, which represents a 12.6% growth rate over the year-ago period. This managed to top analysts' consensus forecast of $72.86 billion. So what led to the revenue beat?

UnitedHealth's insurance customer count grew 4.5% year over year to 50.6 million. Paired with health insurance premium increases, this is how the company generated such robust sales growth in the fourth quarter. Growth in UnitedHealth's customer base and insurance premiums helped full-year revenue increase 11.8% year over year to $287.6 billion in 2021. 

Profitability was also strong. UnitedHealth's non-GAAP (adjusted) net margin surged 210 basis points year over year to 5.8% in the fourth quarter. Along with a 0.6% reduction in the company's outstanding share count and the higher revenue base, this allowed UnitedHealth's non-GAAP earnings per share (EPS) skyrocket 77.8% year over year to $4.48 for the fourth quarter. A higher revenue base and disciplined cost management also enabled UnitedHealth's non-GAAP EPS to grow 12.7% in 2021 to $19.02.

Because of the positive, secular trends within the health insurance industry, analysts anticipate that UnitedHealth's non-GAAP EPS will grow at a healthy 15% rate annually over the next five years. 

An unmatched balance sheet

UnitedHealth is a fundamentally healthy company based on its demonstrated past growth and future growth potential. But what further sets it apart from its peers is its strong balance sheet.

The company's $21.98 billion in net debt against earnings before interest, taxes, depreciation, and amortization (EBITDA) of $27.02 billion in 2021 works out to a net debt-to-EBITDA ratio of 0.81. This is far better than health insurers Anthem and Humana, which sport ratios of 1.61 and 1.35, respectively. 

UnitedHealth's debt load is much more manageable than what other large-cap peers face, which in turn lowers its overall risk.

A spectacular stock at a fair price

UnitedHealth's stock has soared 48% in the past year and currently trades at $492 a share. But even with the strong stock performance, I would argue that UnitedHealth is still a buy. Why is that?

Well, the shares are trading at a current year P/E ratio of 22.7. While this is approximately 18% higher than the S&P 500's multiple of 19.2, I believe that UnitedHealth is deserving of such a premium. That's because of the stock's superior growth profile and solid balance sheet.

With a very conservative 29.4% dividend payout ratio and mid-teens annual earnings growth forecast, the stock will likely be a dividend growth machine for many years to come. Combined with a 1.2% dividend yield, this makes UnitedHealth an attractive buy for dividend growth investors.