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No. of Recommendations: 3
Cardinal Health (NYSE: CAH) was the sixteenth stock mentioned in this post: https://boards.fool.com/time-to-look-at-things-again-3424198... , which makes it next up for review. Cardinal Health is in the business of providing medical supplies and cost containment services. Like much of the health care industry, it's in a weird space right now, with much non-emergency medical care on hold due to the Covid-19 pandemic.

I don't own its shares, but I do own its bonds.

Dividends: Cardinal Health currently pays a dividend of $.481 per share per quarter, though it has paid that dividend for four consecutive quarters, so it's due for a potential increase with its next one, if it's able to do so. Based on history, we should know mid-May if it does or not. Cardinal Health's yield is around 3.9%, and although it has reported an accounting loss over the trailing four quarters, its dividend looks well covered by its ordinary operating cash flows, though who knows what Covid-19 will do to its near term cash flows... Based on its dividend, I'm willing to continue holding on to the Cardinal Health bonds I own.

Balance Sheet: Cardinal Health has a higher debt to equity ratio than I'd like to see, driven in part by the write down of its 2015 Cordis acquisition -- the same reason its reporting an accounting loss over the past four quarters. Still, its current ratio is just above 1.0 and it is showing just above $1.6 billion in cash and equivalents on hand. In a world where Covid-19 has shut down much of the economy, that's a solid coverage position. Based on its balance sheet, I'm willing to continue holding on to the Cardinal Health bonds I own, but I'd certainly hope the economy starts opening back up sooner rather than later.

Valuation: Based on a discounted earnings model that presumes the world is about back on track in 2021, I estimate Cardinal Health to be worth around $55.59 per share. That's slightly ahead of its recent market price of $50.32 per share. Your guess is as good as mine, however, as to what Covid-19 does to the hospitals that Cardinal Health serves, so take that valuation estimate with a very large grain of salt.

Next Steps: I plan to hold the Cardinal Health bonds I currently own and plan to watch the upcoming earnings and dividend announcements carefully for signs that I may need to revisit that.

Regards,
-Chuck
Discovery/HR Home Fool
Disclosure: I own Cardinal Health bonds scheduled to mature in June 2022.
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