Who knew that crypto might be cranking out millionaires practically overnight in 2021 or that Gamestop and a few other meme stocks might do the same? If you're one of the lucky ones, congrats! But long-term investors are looking at building an investment portfolio with companies with solid histories, strategies, and road maps that aren't spurred on by hype. UnitedHealth Group (UNH 0.27%) provides those characteristics, along with huge gains -- minus the level of risk.
In fact, UnitedHealth's gains over the past 10 years might surprise you, and if you remove all the ups and downs in between that span, UnitedHealth has turned out to be a better investment than Gamestop by a 2 to 1 ratio in gains for long-term investors.
How has the company grown over 10 years?
In 2012, UnitedHealth ranked No. 22 on the Fortune 500 list of America's largest corporations by revenue. Its annual revenue for that year was $110 billion, with earnings of $5.28 per share, allowing for an annual dividend of $0.80 per share paid out to investors. If an investor had purchased $5,000 worth of UnitedHealth stock in February 2012, they would have gotten 94 shares at $53 each.
This past year, the company's annual revenue increased by 12% over 2020 and more than doubled what it was 10 years ago, hitting $287 billion and leading to earnings of $24 billion -- five times the earnings in 2012.
What's helping drive UnitedHealth's revenue and earnings is its dual strategy. Its UnitedHealthcare segment generates revenue through insurance and benefits coverage, while its Optum segment hosts the country's largest pharmacy-benefit management operations system and uses innovative technology and data to offer a network of doctors and care centers to match its customers' needs. Optum's customer count increased by 2% in 2021 to over 100 million served. And revenue per consumer jumped by 33% year over year.
So how much would investors have now?
Let's revisit those 94 shares bought in 2012. At last week's closing per-share price of $483, we'd be looking at a gain of $430 per share -- that's an 811% gain in 10 years. That comes to a total value of $45,000 and a gross profit -- at least on paper -- of $40,000. But that's not all. We can't forget the dividends once paid out at $0.80 per share that are now paying $5.60 per share after 10 consecutive years of increased dividends.
For the sake of simplicity, let's say the dividend increased at a steady rate over those 10 years. When taking the average of the annual per-share dividend of $3.20 and multiplying that by 10 years for each of those 94 shares, we would score another $3,000. And for investors that reinvested dividends, suffice to say that would equate to even more. So, a $5,000 investment 10 years ago would be worth over $48,000 today. UnitedHealth's growth and ability to provide that type of return on investment over a 10-year span are what make the stock one to buy and hold for the long haul.
Going into 2022, the company shows no signs of slowing down. It's projecting it will bring over 500,000 new members to its value-based payment program -- a program based on the level of care and outcome for patients rather than solely on the services rendered.
The company is also awaiting word from the Department of Justice related to UnitedHealth's interest in acquiring the innovative healthcare data platform of Change Healthcare, which connects patients, payers, and providers through an expansive data set and data transfer capability. The tentative acquisition by UnitedHealth has received the attention of competitors like the American Hospital Association, claiming the deal would create a monopoly on healthcare data.
It will be interesting to see what the DOJ decides before the deal is set to close in April. Meanwhile, investors who have stuck around for the past 10 years might be looking at crossing the $50,000 value mark on their investment if the stock can cross the $500-per-share threshold.