Big Pharma mainstay Pfizer (PFE) was once a dividend champion with a steady string of 30 consecutive annual increases. That streak ended in 2009-10, however, when it slashed its dividend in half — from 32 cents quarterly to 16 — amid the global financial crisis.
PFE’s dividend is back up to 24 cents, and at a yield of 3.4%, no one buying in today would exactly be crying “uncle,” but the pace of Pfizer’s dividend growth has slowed to single-digit percentages.
That’s partly because Pfizer’s business model requires constant new-product development and innovation to introduce new drugs that can replace the high-priced products once their patents expire. Get caught between cycles, and profitability and cash flows can — and do — suffer.
While Pfizer is working to regain shareholder trust, the troubles facing it and all of Big Pharma are enough to keep me away.