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Stock Incentive Plans (Tables)

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

The following table is a summary of stock-based compensation for the years ended December 31, 2020, 2019 and 2018:


In millions	2020		2019		2018
Stock options and stock appreciation rights (“SARs”) (1) (2)	$	71	$	76	$	70
Restricted stock units and performance stock units (2)	329		377		210
Total stock-based compensation	$	400	$	453	$	280

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(1)Includes the ESPP.

(2)Stock-based compensation for the year ended December 31, 2018 includes $14 million and $27 million associated with accelerated vesting of SARs and restricted stock replacement awards, respectively, issued to Aetna employees who were terminated subsequent to the Aetna Acquisition.

Schedule ESPP valuation assumptions

The following table is a summary of the assumptions used to value the ESPP awards for the years ended December 31, 2020, 2019 and 2018:


	2020			2019			2018
Dividend yield (1)	1.46		%	1.70		%	1.45		%
Expected volatility (2)	37.21		%	27.96		%	28.02		%
Risk-free interest rate (3)	0.81		%	2.27		%	1.87		%
Expected life (in years) (4)	0.5			0.5			0.5
Weighted-average grant date fair value	$	13.85		$	10.51		$	12.26

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(1)The dividend yield is calculated based on semi-annual dividends paid and the fair market value of CVS Health stock at the grant date.

(2)The expected volatility is estimated based on the historical volatility of CVS Health’s daily stock price over the previous six month period.

(3)The risk-free interest rate is selected based on the Treasury constant maturity interest rate whose term is consistent with the expected term of ESPP purchases (i.e., six months).

(4)The expected life is based on the semi-annual purchase period.

RSU and performance share unit activity

The following table is a summary of the restricted stock unit and performance stock unit activity for the year ended December 31, 2020:


In thousands, except weighted average grant date fair value	Units	Weighted Average Grant Date Fair Value
Outstanding at beginning of year, nonvested	13,125	$	61.57
Granted	6,849	$	58.38
Vested	(3,793)	$	60.40
Forfeited	(1,357)	$	59.10
Outstanding at end of year, nonvested	14,824	$	58.12

Cash proceeds received and tax benefit from share-based payment awards

The following table is a summary of stock option and SAR activity that occurred for the years ended December 31, 2020, 2019 and 2018:


In millions	2020		2019		2018
Cash received from stock options exercised (including ESPP)	$	264	$	210	$	242
Payments for taxes for net share settlement of equity awards	88		112		97
Intrinsic value of stock options and SARs exercised	24		30		79
Fair value of stock options and SARs vested	252		467		324

Schedule of valuation assumptions

The fair value of each stock option and SAR is estimated using the Black-Scholes option pricing model based on the following assumptions at the time of grant:


	2020			2019			2018
Dividend yield (1)	3.42		%	3.68		%	2.76		%
Expected volatility (2)	25.22		%	21.76		%	21.27		%
Risk-free interest rate (3)	0.61		%	0.56		%	2.77		%
Expected life (in years) (4)	6.3			6.3			4.8
Weighted-average grant date fair value	$	8.78		$	6.27		$	24.55

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(1)The dividend yield is based on annual dividends paid and the fair market value of CVS Health stock at the grant date.

(2)The expected volatility is estimated based on the historical volatility of CVS Health’s daily stock price over a period equal to the expected life of each option or SAR grant after adjustments for infrequent events such as stock splits.

(3)The risk-free interest rate is selected based on yields from U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of the options or SARs being valued.

(4)The expected life represents the number of years the options or SARs are expected to be outstanding from grant date based on historical option or SAR holder exercise experience.

Schedule of stock options and stock appreciation rights award activity

The following table is a summary of the Company’s stock option and SAR activity for the year ended December 31, 2020:


In thousands, except weighted average exercise price and remaining contractual term	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of year	23,902	$	69.98
Granted	4,759	$	58.50
Exercised	(2,601)	$	52.95
Forfeited	(1,164)	$	57.61
Expired	(941)	$	83.34
Outstanding at end of year	23,955	$	69.62	4.86	$	185,487
Exercisable at end of year	13,545	$	78.05	2.79	78,289
Vested at end of year and expected to vest in the future	23,448	$	69.87	4.78	180,102