You guys working for CVS are insane if you weren't maxing your ESPP when the stock was at 50.
Yes and no- it was definitely more attractive when CVS used to offer a 15% discount instead of the 10% currently (especially since there is an 18 month holding requirement).
Say I would max ESPP Enrollment $20k per year ($10k per enrollment period)-
$10,000 earns no interest during each six month enrollment period that I could use to pay extra principal on my 4.125% mortgage ($825 savings
no-tax)
IF CVS stock would make a huge
jump of 40% from $50 to $70 and remains there for the whole year:
$20,000 at a 10% discounted purchase vs. market price $22,000 = $2,200
pre-tax
After 20% long term capital gains this is reduced to $1,760 profit (
IF you hold it even longer to be considered a qualifying disposition, otherwise you risk being taxed ordinary income rates)
So
IF the stock would jump 40% and stays there, at best I would be $935 ahead. And that is a very optimistic outlook- it could stay stagnant or dip back down again the following year.
For me personally, risk/reward just isn't as great with the 10% discount and holding requirements. I'd rather dump extra cash into maxing out 401k, HSA (triple tax benefit), Roth IRA, or my own investment ETFs offering high dividends.