Current Dividend Yield: 3.6%
Performance So Far in 2012: +11%
Pharma stocks are always mainstays for dividend investors, and Pfizer (NYSE:PFE) is one of the favorites. For instance, amid the quest for yield last year, the stock outperformed the market nicely in 2011 with one of the best returns in the entire Dow Jones in 2011 — 23% in gains, to be precise.
However, there have been some setbacks of late. In August, J&J and Pfizer abandoned their Alzheimer’s drug studies as poor results hit home. And of course, patent expirations hurt — most notably the recent departure of blockbuster Lipitor into the realm of generic competition.
Still, thanks in part to good numbers lately, PFE is now outperforming the broader Dow Jones Industrial Average so far in 2012. Shares have leaped almost 10% since mid-July alone.
Looking forward, the company has a decent research pipeline with some up-and-coming drugs that could rotate in to prop up revenues. There’s also some restructuring going on, including an IPO for its animal health business. Also, the company has $29 billion in cash on the books — so even even if revenue hits a hiccup or some of the moves now don’t immediately pay off, the cash is there to preserve this juicy dividend.
Big picture, you can’t get more low-risk than health care. People buy drugs no matter what the economy is like. Also, it’s hard to argue with the growth potential looming in a huge demographic shift provided by aging baby boomers. Thus, Pfizer remains a great long-term dividend play despite some challenges.