 This is St. Tech, Hawaii, Community Matters here. Once again, ladies and gentlemen, we are here back live at the Prince of Investment, right here live with the host, Prince Dyke, coming all the way live on the beautiful state of Denver, Colorado, via the lovely state of Haluu, Hawaii. But as always, I don't have a lot of time, but before I get into that, don't forget to hit the like, subscribe, comment, and share button, follow the channel, follow me if you get the playback or how you may catch this around the globe. But as always, I don't have a lot of time, and I definitely know you guys and girls don't have a lot of time, so we're going to jump straight into it. So as you guys and girls know who follow me, follow this show, and follow anything that I do, you know that, you know, I like dividends, right? So you know, dividend, dividend paying stocks, the stocks that pay you dividends, right? So when you pay for, when you purchase a stock, you buy on a piece of a company. And when a company makes money, some companies, they pay back the dividend. So this show, as you can see in the description box, we're going to be talking about CVSL, the Forgotten Dividend Stock. And why did I choose the topic? Why did I bring this topic? I was on Seeking Alpha, you know, I'm a follower seeking Alpha as well. And I think, you know, I like to think of a lot of the contributors that have been on the show past and present. But an article came across that was written by one of my veteran buddies. You know, I love to always have some of my veteran buddies that are on doing great things after life, after the military. And he had an article up on Seeking Alpha called CVS, the Forgotten Dividend Stock. So when I saw this, I immediately said, hmm, I read the article and I was very intrigued by it. And I said, hey, I want you to come on. I want you to tell your side of the story. Or why do you think CVS helped? It's the Forgotten Dividend Stock. But what I further to do, let me bring in my very, very special guest today, called all the way live. Well, he's not calling. He's here live today with us, all the way from South Carolina, contributors to Seeking Alpha and to Stephen Lang. How are you doing today, sir? Good, Prince. I appreciate you having me on. Oh, yeah, definitely. For people out there, before we jump into the topic, can you tell people a little bit about yourself? Yes, so I was in the military for four years. After I graduated high school, I joined. I did his appointment in the Western Pacific for six months. I got a lot of cultural experiences by sailing around Asia and living in Hawaii. After my four years where I actually met you and you were my boss of the Navy. And then after that, I came to the College of Charleston down here in South Carolina. I wanted to come here because of their investment program. And I got accepted to it as a sophomore. I'm with 21 incredible and intelligent students at the college. And we manage a portfolio of $150,000 in real money. The programs led by Dr. Piles, who's the best teacher I've ever had. He's incredible. He's taught me a lot about finance. And now I am still in the investment program. I wrote a seeking out article last month about CVS. It's called CVS, the Forgotten Dividend Growth Stock. And I think we're going to be speaking about that a little bit today. That is true. So definitely, first question I want to ask you, why do you think CVS is the Forgotten Dividend Growth Stock? Yes, so CVS, the prior 10 years to 2018, they had a compounded annual growth rate for their dividend of 25% on average. And they actually acquired ETHNA recently. When they announced it in late 2017, they announced a frozen dividend of $2 per share on an annualized basis. And this is the reason why it's Forgotten because they stopped their growth. But I believe this was a smart move on their part because they're taking a lot of on debt with it. So they'll be at 4.6 leverage. And then they plan on doing their dividend growth when they're in the low threes as far as leverage. And I think with the synergies that CVS, ETHNA, and their PDM called Caremore Caves will make them a dividend growth beast, I believe, after they get their leverage down. Now, you said their leverage is at 4.6, am I correct? Correct. Now, when you said their leverage is at 4.6, can you explain how that to listeners, what does leverage mean? Their leverage is at 4.6, OK, what does that mean? Yes, so the way they calculate this is they're doing debt divided by EBITDA, so earning before interest tax, taxes, deductions, and amortization. So usually, if you have a higher leverage ratio, it's not as good. So they're at 4.6 around right now. And once they lower that, in the low threes, they plan on increasing their dividends again. It's just a response goal by management to do that, because you don't want to keep increasing your dividend payments when you have a lot of debt, which they took on with their $77 billion acquisition of ETHNA. So essentially, you're saying instead of paying the investor's dividends, they want to retain some of that money inside of the company and to pay off some of the debt that they owe for acquiring ETHNA. Correct. Yes, they have to pay off some of their debts, lower their debt, and lower their leverage. Now, OK, so what makes you give you this impression that it was forgotten? What makes you think it was forgotten? So CVS used to be sort of a darling, was dividend growth investors. Actually, in 2009, year-over-year dividend growth was around 19%. And then 2010, it was 11%. And there's a lot of people now that was during the recession, and they could still manage double-digit dividend growth during those years. And like I said, the last 10 years is 25% on average year-over-year compounded annual growth rate. And yeah, once they halted that, a lot of CVS shareholders weren't too happy. But I see it as the responsible thing to do. And once they get their leverage down, I believe that they're going to continue their growth. Now, have you been monitoring their leverage? Have you been monitoring their debt? Have they been paying out their debt? Are they on track to pay off this debt? And what do you think they're going to get out of this rut to where they can get back to paying dividends? Yeah, so I believe right now we're around in the mid-4s. And I was looking at one of their reports, and management was guiding for two years out. So the end of 2020, they should be in that low three range based on what I saw. They'll come out with earnings in February, so I'll get more color there as far as their current leverage ratio. Now, well, to the person that's listening and saying, yes, it was forgotten, and a big article came out, said CVS health freezes its dividends, right? There's all the magic we're going to scare investors of. Because by monitoring dividends, it's a way to indicate a company's health. A company that can slowly pay dividends and increase dividends over time, it's a good indicator that, hey, if a company can manage to pay dividends, like you said earlier, especially in a recession, that speeds volumes of their financial stability. What the person that's listening that says, well, why won't I just wait until 2020, then I'll just buy CVS? Yes, again, one long CVS, it's in my portfolio. I think it's an opportunity with the acquisition that drove the stock price down. The debt's an issue. A lot of people look at that and have some peers there. A lot of people may have gotten out because they stopped growing their dividend. And then also the Amazon effect actually had a negative impact on the share price. So Amazon announced that they were looking to get into the pharmaceutical business and they've acquired Tiltat recently. So they gave a 49 states authorization to provide prescription drugs. But I was actually reading an article about a year ago, and they tried to get into shipping certain creams and ointments that were prescriptions and they had trouble logistically shipping them to where they couldn't keep the proper temperatures. So it just kind of shows that between that and the regulations around health care, the CVS, FLTAT. I see it is kind of hard because Amazon's trying to get into everything. They're actually succeeding. But I think the health care industry is harder to really crack in. And what CVS has about 10,000 stores, and I believe those are touch points, to where the etna, the etna acquisition, I believe, is going to bring in more customers to the same place. But traffic, and that's where I see the growth in synergies. OK. Now when you say dividends, someone who has a long-term portfolio in 20, 30 years, why are you a young man? Why are you investing into dividend paying stocks? Why not get you to do like an Amazon? It doesn't pay or a Berkshire Hathaway or companies, a new technology company, something like a Facebook or a technology company that doesn't pay dividends. Why would you rather this big, large-cap company that's paying dividends over a company that has a long way to grow like a Tesla? Yeah. So, well, for my age group, I actually have a little, I have some exposure to different stocks among Facebook, things like that that they don't pay a dividend. But what I look for in the lion's share of my companies that I buy is a shareholder. I look for consistent dividend growth. I don't CVS faulted it, but I think I'm taking more risks to where the rewards could be down the line there. But for the lion's share of my portfolio, I'm buying companies that increase their dividend over time. And the biggest ratio that I look at is called yield on cost. So for example, say you buy a stock at $100 today and it's paying out a $2 dividend per share annually. So your current yield will be 2%. Now, say that they're raising their dividend year after year and say maybe 10 years down the line, they're paying $4 a share. If your yield on cost based off your initial tranche would be 4%. And say maybe another 10 years down the line, they're raising $8 per share, right? Because they're growing their dividend all the time. You would take the current dividend payout and divide it into your initial purchase price of $100. Now, bring your yield on cost to 8%. And if you look at Warren Buffett, a lot of the companies he bought, such as Coca-Cola, I think he was dealing on cost about 70 something percent. And it just shows that the company is raising their dividends with the strength. And that's yield on cost is the reason why I looked at those companies. And then also, if you look at a lot of companies that don't pay dividend, then you run the risk of management, such as Snapchat, he spent, I don't know, how many million dollars on a senior seed party, things like that, where I like companies that pay out money to their shareholders, their shareholder-friendly, so that money doesn't get squandered. Now, it's pretty important that you bring up Warren Buffett. You know, Warren Buffett's CEO, Berkshire Hathaway. But Berkshire Hathaway, it doesn't pay dividends. What do you think about that? Correct. That's kind of the reason why I don't buy Berkshire. It's a great company. I have to look more into why they don't buy it. I think there's an interview that has, where he explains it, but yeah, I'm not too sure why exactly they don't. You know, he kind of says that, you know, you would get your value out of the company rising over time in value. So now, great point that you brought up. You brought up the yield over cost, right? And you brought up companies that slowly pay dividends over time. How can I find a company that pays dividends and that has increased over time? Yeah, great place to start. You can look up dividend aristocrats, dividend kings, dividend achievers. So dividend achievers are 10 or more years, dividend growths. Dividend aristocrats are 25 or more years of dividend growth. And then dividend kings, 50 or 50 plus years. And some kings are Johnson and Johnson. I'm Long Johnson and Johnson. And I believe General Mills is a king. And big old companies like that, who have done well over time, such as Johnson and Johnson. And they're still raising their dividends on average around 70%, 80% a year in 2019 now. OK. So that's great that you brought up the part about the dividends. But what do you have to say to the fact that CVS, the stock itself, on the one-year chart, the three-year chart, the five-year chart, and the ten-year chart, it has underperformed the S&P 500. What do you have to say about that? Yes. To the index investors. Yes. So the index has 100% beaten CVS. They've been under pressure for various reasons. Well, as of late, the Aetna before that, Amazon, other regions. But yes, I'm a big, I believe, an index fund as well. If you invest in the S&P index fund or SPY, I believe it is, you're still getting around 2% yields. And you can't really. If you don't know how to pitch individual stocks, for example, I own the Fidelity index fund, which is a total market, along on that. I like to have, because it provides you immediate diversification. So you buy a bunch of companies, the S&P 500, you buy the top 500 market cap companies in the United States. So if you're bullish on the United States, it would make sense to buy an S&P 500 index fund. You can't go wrong with index funds, I believe. OK. Now, because someone who's looking at it and saying, I have an index and I just purchased the S&P 500 index, a low-cost index out there. But that is the only company that I think that actually went to zero on fees. Yes. But Charles Swapp has 1.02 that I currently purchase. And I'm currently buying that. You jump over here and say CVS is the forgotten dividend stock. But it's underperformed. Is dividend, is it slightly higher than the index? Should I, why should I add that to my portfolio? Well, first off, I would say, yeah, you have to look at your specific situation. These are all my opinions. I'm not really a licensed advisor or anything of that. But yeah, so the risk reward, you've got to look at your risk reward. With CVS, you're going to take on with that debt. That's added risk there. But you have to measure risk reward, CVS. Yeah, I want to know. Because I just want to know, not to cut you off, but I just want to know your personal opinion. That's exactly, you know, I don't want a recommendation to say, hey, you're saying this or do this, but it's your personal opinion. If you have a total market, you have the S&P 500 index that you're currently investing in, you're earning 2% off of it, great. And you're outperforming CVS, why should I stop that to jump into CVS? Because the S&P 500 is the benchmark. If you're not beating the benchmark, why should I be attracted to CVS that's going to be a great dividend stock, potentially, if Etna turns out to be great and things, but why should I absorb that type of risk? Yeah, so I look at CVS and I really like the company. When I look at stocks, I look to buy the company, Warren Buffett, the investing, you know, so the investing guy pretty much says, only invest in a stock if you buy the entire company. I'm familiar with the product. I actually started buying the stock back in 2016. I like the healthcare. There's an increasing of the aging population group. I like those tailwinds there. I like that you need to go if you're sick. You go to the physical pharmacy. So if you need medicine now, you can't really order on Amazon and come right away. You go out and get it. I like that factor. I like that CVS has the 10,000 stores. And right now, I've been buying the ratio because of the increased share price. They're only trading at about a nine price that earnings multiple. And yeah, with the fears of the etna and everything, it could be, it's for the long-term monitor investor. I think it could be a great play. And that's the synergies, like I said, with the etna and the different touch points is why I believe CVS is a good investment there. Okay, now I want to speak on competition. It's rival Walmart. I always see Walmart and CVS right next to each other. Why not Walgreens? Not Walmart, but I'm thinking Walgreens. I always see Walgreens and CVS right there next to each other. Walgreens just got picked up out of Dow Jones if I'm not mistaken. Why not Walgreens? Yeah, so actually Walgreens is, I believe, a dividend king. So I like Walgreens a lot as well. It's just the business plan in the future. It's never been done before with the insurance, PBM, and retail pharmacy. Walgreens hasn't done it yet. So CVS will be leading that charge. And I really think if you look at different aspects of the business, such as mini clinics, this 10,000 stores are only about a thousand. But you can go in, and I know people in my family and friends that I know start using mini clinics. So they're going in when they're sick or to get a shot and they're walking or driving the CVS and then get their shots. If they have a cold or something minor, they can go there, be seen by a nurse practitioner and get their prescriptions all right there. And I kind of see those things in the market and based on what I've saw, Larry Merlowe, the CEO, as you might say, is they're making, they want, they envision CVS to be the healthcare hub. And they can see another reason why I'm bullish is they can grow their earnings based off the fact that, or not the fact, they can see lower costs, due to when EGNA, they provide the foot traffic, they can lower the costs by, they want to be a service to where they can get people following their healthcare regime. And this is a lower cost because the insurance won't have to pay as much and it'll keep people healthier, which I'm a big believer in. I like to invest in companies that make the world a better place and everything. And the healthcare hub is the reason why I like CVS more than Waldo and Zare. Okay, that's a, you know, so you pretty much just saying, hey, I think the, which word am I looking for here? The growth potential of CVS is higher than Walgreens. Am I correct on that? Yes. Correct. Okay. Okay, so that's correct. So why would you want to go to CVS over Walgreens? So now going forward, right? When you look at Walgreens, which is a dividend king, right? Give that high RQ you just gave before about the dividends, the levels of the dividends. Yes. Oh, was that? You gave that level like you had the king. Yeah, you had the king. What's the highest? 50. Yeah. King aristocrat and achiever. So the achievers 10 aristocrats, 25 kings, 50. Mm-hmm. Now Walgreens is a king, correct? Correct. What about CVS? CVS is not. They're one of the verge of becoming, I believe, an aristocrat until they halted their increase, increasing their dividends when they announced the acquisition a year ago. And so if you're following me, I would not, You know, not to cut you off there. I know this is a little delayed, but at your philosophy you said you want to get the dividend kings, correct? Correct. So if you want to, why not go with Walgreens who's a dividend king who is not, their growth potential is not that far off and who, you know, who's pretty much in the same space? Yes, you're right. For the majority of my portfolio, that would be the case. But for, I think the point I'm trying to make is for people who have a longer time investment time horizon and are willing to take on more risks, and I think CVS would be a good option for the more conservative investor that's looking for steady eddy companies and Walgreens may be the better option, just kind of where you are on your time horizon, your risk reward, your sensitivity to risk. But yeah, I usually lean more towards the conservative side, but the unique business model I see is the reason why I'm bullish on the company. Now, before we get out of here, is there anything else, what do you want to leave the fans, the people that are checking out this episode around the globe, out in Hawaii, the people that's going to catch the playback on YouTube, Facebook, Instagram, Twitter, all of that stuff like that, and the people that's going to catch us back on the podcast, what do you want to say, what do you want to leave with them with? Oh sure, first of all I'd like to say, I really appreciate you having me on the show. It means the world to me. I just wanted to say thank you there, and you've been a great mentor to me throughout my military career. I remember you saying, set yourself up for life after the military because one day we'll have to take the uniform off and I really get home to me and then you look more towards investing and various other things to get prepared. So thank you for that. And then I'm a writer on Seeking Alpha, if you want to check out my article, feel free. It's Stephen Lang, F-T-E-D-E-N-L-A-N-G-E. And if you want to follow me on Instagram, it's Steve Lang, one, two, three. Yeah. All right, well, you know, definitely it was a pleasure. I'm very proud of you for, you know, seeing you as that a young kid from serving to going off and getting into the financial industry and going to school and studying and seeing you pop up on Seeking Alpha. Great article, by the way. And for everybody out there, I should have said this in the beginning, but the article will be in the description box where you would check out yourself to check out the article, the CVS, the Forgotten Dividend Stock. I thought it was great analysis, how you broke it down. And I thought you explained yourself very well of why you believe in CVS and comparing to what else is out there. So, hats off to you. Very proud of you for what you're doing. You know, continue to progress in life and bettering yourself. And definitely, and I definitely look to see more about what Stephen Lang is bringing to the world. Yeah, thank you. All right. Have a good night. Have a good night. All right, so to all of the fans out there and to the next video podcast, cartoon, book, or one of those crazy UCMU do around the globe, peace, be safe, I'm out, and thank you.