UnitedHealth's (UNH) - Get Report1.5% dividend yield may seem paltry compared with peer Anthem's 2% yield, but a nifty dividend is just one of many reasons to own this diversified provider of health care coverage.

The company boasts nearly four decades of operating history, $165 billion in annual revenue and $6 billion in annual profits. Meanwhile, analysts expect solid earnings over the next year and five years. 

This all makes UnitedHealth a superb, long-term growth investment in a dicey overall market.

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First, let's deal with the dividend yield fallacy.

Some think that UnitedHealth's 1.51% yield, which is lower than the industry average of 1.64%, and its limited dividend growth history of six years makes it a weak income play.

But UnitedHealth's dividend growth rate is stupendous, rising to $1.88 a share last year from 61 cents in 2011, which is why the stock should be an integral part of investors' wealth-building strategies.

In terms of UnitedHealth's peers, Aetna has doubled dividends, as has Anthem. Humana's dividend has risen to $1.15 from 75 cents, while Cigna shareholders received a measly 4 cents a share dividend annually for the past five years.

Although UnitedHealth's yield may be low, dividends are growing at a much faster rate. Plus, the low payout ratio of 25.4% leaves room for dividend income appreciation.

In addition, UnitedHealth should report solid earnings over the long term. Analysts project that the company will report a double-digit rise in earnings per share over the next two years, with an average annual growth rate of 14.78% over the next five years, which is slightly higher than the industry average.

Meanwhile, UnitedHealth could get an earnings boost from its plans to stop offering policies on the Affordable Care Act insurance exchanges in most states next year. 

Analysts expect the stock, which has a beta of 0.63, to reach $150 in the next 12 months, a 13.13% increase.

UnitedHealth stock's low beta also makes it ideal for investors troubled by huge swings. 

Seasoned investors such as Leon Cooperman of Omega Advisors fame have started picking up shares of UnitedHealth.

After all, UnitedHealth is among a handful of stocks that over the 30 years ended in January generated cumulative total returns of 10,000% or more.

So make a move and grab a piece of this value stock that promises fast-rising dividends, double-digit earnings growth and robust stock price gains.


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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.