CVS Stock And 2 Dividend Plays Built For Higher Rates

With Treasury yields hovering near multi year highs and rate cuts looking less certain, investors are weighing what higher borrowing costs and a stronger dollar could mean for long term portfolios. This is creating an opening for those who care about steady income and valuation discipline but also feel the recent pullback in equities might be overdone in places. This article walks through three dividend payers from our high quality screener that appear well aligned with the latest macro signal.

The three stocks highlighted below are just a sample from this idea, and the full screen surfaced 39 more large cap dividend payers with similarly detailed stories around income resilience and valuation discipline that are not covered here. If you want to go straight to the source, analyze payout strength and identify potential higher conviction ideas, head into the High-Quality Dividend/Payer Value Stocks in a Higher-For-Longer Rate Environment screener.

CVS Health (CVS)

CVS Health is an integrated U.S. healthcare company that combines insurance, pharmacy benefit management, and a large retail pharmacy footprint, which fits the screener’s focus on essential, cash generative businesses with income and value characteristics in a higher rate setting. Most revenue comes from Health Services at about US$200.5b and Health Care Benefits at about US$143.8b. The Pharmacy & Consumer Wellness segment adds about US$139.7b, with corporate and intersegment items offsetting the total. The stock has a market cap of roughly US$119.8b, placing CVS firmly in the large cap bracket investors often look to for resilience.

Investors watching CVS Health today are looking at a large, essential services healthcare company that is working through a complex turnaround while still paying a dividend and reaffirming its income story in recent updates. The Health Care Benefits segment, including Medicare and Medicaid plans, sits at the center of both the opportunity and the risk, as management works to align pricing, medical cost trends and Medicaid rate updates after a period of higher acuity and earnings pressure. At the same time, CVS is pushing ahead with a US$2b restructuring, expanding its care footprint and rolling out cost saving technology. If this is executed well, it could support margins, cash flow and the stock’s value profile in a higher for longer rate backdrop.

CVS Health’s turnaround, cost cuts and dividend story could be masking a bigger shift in its risk reward profile. See how the income, valuation and medical cost pressures line up in the 4 key rewards and 2 important warning signs

Build your own higher-for-longer income shortlist

CVS Health and the two other stocks in this list came from a single high quality screen, but the real value for you is in shaping the filters yourself. Use our flexible Screener to mix metrics like valuation, income profile, balance sheet strength and risks, or lean on the ready made themes in our Investing Ideas.

PepsiCo (PEP)

PepsiCo is a global consumer staples company that sells snacks, cereals and drinks through brands like Pepsi, Lay's, Doritos, Quaker and Gatorade. This fits the screener’s focus on large, cash generative dividend payers that may appeal when rates stay higher for longer. PepsiCo Foods North America generates about US$27.5b of revenue and PepsiCo Beverages North America about US$29.2b, with Latin America Foods at roughly US$11.2b, Europe, Middle East and Africa at about US$18.9b, Asia Pacific Foods at US$4.9b and the International Beverages Franchise at US$5.2b. The company has a market cap of roughly US$193.9b, placing it firmly in the mega cap bracket.

Income focused investors looking at PepsiCo today see a mix of strengths and questions. On one side are highly recurring snack and beverage sales, strong free cash flow, a long history of rising dividends and management guiding to ongoing cash returns through 2026, which can be appealing when bond yields are higher and markets are more selective about quality. On the other side are slower growth in core sodas and snacks, health and affordability pressures, and a balance sheet that carries meaningful debt, all against a backdrop of rising funding costs and currency swings for a global business. The real draw is how these pressures interact with PepsiCo’s push into functional drinks, productivity gains and activist scrutiny. Together these factors could reshape earnings resilience more than the headline numbers alone suggest.

PepsiCo’s cash returns and dividend record suggest a sturdier story than headline growth alone, particularly when considering debt, funding costs and product shifts. See how these cross currents stack up in the analysis report for PepsiCo

Hershey (HSY)

Hershey is a US based confectionery and snacks company that fits the screener’s higher for longer income theme through its mix of defensive chocolate, candy and pantry staples supported by well known brands and steady cash flows. North America Confectionery generates about US$9.8b of revenue, with North America Salty Snacks at about US$1.4b and International at just under US$1b, giving the stock a largely domestic but growing global footprint. With a market cap of about US$37.8b, Hershey sits firmly in large cap territory that many income focused investors look to for resilience.

Hershey offers what many see as a classic defensive profile that can appeal when higher rates and a stronger dollar put pressure on more growth sensitive stocks. Strong chocolate and snack brands, pricing power and a 3.11% dividend yield are set against rising interest expense, high cocoa costs and recent share losses to rivals. This puts more weight on management’s cost discipline and product pipeline. Recent Halloween product launches, capital returns through dividends and buybacks, and efforts to manage tariffs and input costs have sustained the long term earnings resilience narrative, but the premium valuation and debt load mean this is a stock where both the quality case and the risks warrant close attention.

Hershey’s premium story, rising input pressures and 3.11% yield could be masking a very different balance of income strength and risk. Get the full picture in the 3 key rewards and 1 important warning sign

Seeking Alternatives Before Others Catch On

Fresh stock ideas can move from quiet to crowded quickly as momentum builds and breakout stories get caught by the crowd. Review these under the radar lists while it matters and consider your options in a timely way.

• Identify early movers with resilient cash flows and steady balance sheets by reviewing the curated 48 high quality undervalued stocks before potential momentum influences valuations.
• Explore the next wave of infrastructure demand by scanning the hand picked 55 AI infrastructure stocks, while these enablers of AI growth may still be less widely followed.
• Prepare for potential commodity sentiment shifts by tracking producers in the focused 10 top silver producer stocks before pricing momentum or renewed interest affects today’s opportunity set.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com