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Aetna(AET - Get Report), one of TheStreet Ratings'
top-rated managed health care stocks, provides coverage for more than 18 million consumers in the U.S., giving the firm a spot in the health insurance oligarchy that's dominated by a handful of large firms. Although the company is far from the league leader, being one of the "smaller" of the huge insurers actually provides Aetna some advantages in this market.
One advantage is the fact that there's additional room for AET to capture more growth opportunities than its lumbering peers. The firm managed to do just that with its full year 2011 earnings call at the start of the month.
While health care reform legislation has been a big concern for all insurers in recent years, Aetna has actually used new bills to its advantage as a bargaining chip, squeezing out concessions from its contracted healthcare providers. The result is a firm with deeper margins and proven negotiating prowess, a winning combination in the managed care business.
Aetna's business generates significant free cash flows, some of which are used to support a modest 1.6% dividend yield. The firm should look to increase shareholder payouts if it wants to capture investment capital from income investors who are currently more taken by higher-yielding rivals. The firm has the financial health to support a dividend hike in 2012.
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