This morning’s jobs report landed hard. Nonfarm payrolls plunged by 92,000 jobs, shattering expectations of a 55,000 gain. Unemployment climbed to 4.4%, while average hourly earnings jumped 0.4% month-over-month — well above the 0.3% consensus. The Federal Reserve is now caught in a classic stagflation trap: slashing rates risks reigniting inflation, yet raising them is impossible with a crumbling labor market. Stagnant growth paired with sticky prices is the likely outcome.
In this environment, defensive names with pricing power and essential demand stand out. Cardinal Health (NYSE:CAH) may be one of the very best stocks to buy now.
Backbone of American Healthcare
Cardinal Health is a global leader in healthcare services and products operating two main segments: Pharmaceutical and Specialty Solutions, and Global Medical Products and Distribution. It delivers branded and generic pharmaceuticals, specialty drugs, over-the-counter products, and a vast array of medical and laboratory supplies to more than 90% of U.S. hospitals, 20,000 physician offices, pharmacies, ambulatory surgery centers, and patients at home. The firm also manufactures private-label medical and surgical products, and runs one of the nation’s largest networks of nuclear pharmacies.
Fiscal second-quarter sales jumped 19% to $65.6 billion while earnings rose by a like percentage to $1.97 per share. Analysts forecast 16% annual growth in EPS for the next five years, underscoring Cardinal Health’s position as an indispensable link in the healthcare supply chain. Its scale allows it to move 40,000 pharmaceutical deliveries daily and manage complex logistics that keep hospitals and pharmacies stocked around the clock.
In an era when healthcare spending continues to rise regardless of broader economic conditions, this steady, high-volume business model provides remarkable visibility into future cash flows.
Three Decades of Consistent Capital Returns
Few companies have rewarded shareholders as reliably as Cardinal Health. The firm has paid dividends for more than four decades and has increased its payout for 31 consecutive years — a record that qualifies it as a Dividend Aristocrat. The current annual dividend stands at $2.04 per share, delivering a 0.93% yield. While the growth rate has moderated to about 1% annually in recent years, the payout ratio remains conservative at roughly 30%, leaving ample room for continued increases.
Beyond dividends, the company has also returned billions to shareholders through disciplined share repurchases. This dual approach — steady income plus modest buybacks — has compounded investor wealth even during periods of market volatility. For income-focused investors navigating stagflation, that long-term commitment to capital return is a powerful anchor.
Why Healthcare Distributors Thrive During Stagflation
Stagflation punishes cyclical sectors. Consumers cut discretionary spending, corporate profits shrink, and higher interest rates squeeze valuations. Healthcare, however, operates on different rules. Demand for prescription drugs, surgical supplies, and medical devices is largely inelastic — patients do not delay cancer treatments or skip insulin because the economy slowed. Cardinal Health’s focus on distribution and essential medical products gives it both defensive qualities and modest pricing power.
As inflation remains, the company can pass along higher input costs to its vast customer base while maintaining strong volumes. Its diversified revenue streams — branded generics, specialty pharmaceuticals, and own-brand medical supplies — further insulate its results. Unlike pure-play pharma manufacturers exposed to patent cliffs or biotech volatility, Cardinal Health benefits from the recurring, predictable nature of wholesale distribution.
History shows healthcare supply-chain stocks have held up well during past inflationary slowdowns, often delivering positive total returns when the broader market struggled.
Key Takeaway
Despite climbing roughly 71% over the past year, Cardinal Health still trades at attractive valuations. The forward price-to-earnings multiple sits comfortably at 18x, well below many growth-oriented peers and reasonable given the company’s stability and cash-flow visibility. It also trades at just 9x the free cash flow it generates, a bargain-basement valuation.
At a time when stagflation threatens to erode purchasing power and punish overvalued names, Cardinal offers a rare combination of defensive earnings, growing dividends, and an attractive price.
For investors seeking to fortify portfolios against an uncertain economic backdrop, Cardinal Health is more than a healthcare play — it is a foundational stock. In a market where growth is scarce and inflation refuses to fade, this reliable healthcare distributor may prove to be one of the smartest buys.
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