Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Pfizer Inc ( NYSE:PFE ) has returned to shareholders over the past 10 years, an average dividend yield of 4.00% annually. Should it have a place in your portfolio? Let’s take a look at Pfizer in more detail. Check out our latest analysis for Pfizer
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is it able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Pfizer pass our checks?
The current trailing twelve-month payout ratio for the stock is 35.62%, which means that the dividend is covered by earnings. Going forward, analysts expect PFE’s payout to increase to 46.86% of its earnings, which leads to a dividend yield of around 4.08%. However, EPS is forecasted to fall to $2.23 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Although PFE’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. In terms of its peers, Pfizer has a yield of 3.75%, which is high for Pharmaceuticals stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, Pfizer is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key aspects you should further research:
- Future Outlook : What are well-informed industry analysts predicting for PFE’s future growth? Take a look at our free research report of analyst consensus for PFE’s outlook.
- Valuation : What is PFE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether PFE is currently mispriced by the market.
- Other Dividend Rockstars : Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here .
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.