Dividend Stocks to Buy: Pfizer (PFE)
Investing Type: Conservative
Dividend Yield: 4%
Pfizer Inc. (NYSE:PFE) has become a well-known dividend player over the years. However, some investors are growing frustrated with the drugmaker’s stock. Shares of PFE are flat on the year and down 2% over the past 12 months.
Put simply, Pfizer has been a dog.
The big question mark with Pfizer is M&A. Despite having brands like Advil, Xanax, Viagra, Lipitor and ChapStick — among many others — investors want more. After all, PFE sports a market cap of almost $200 billion and has the balance sheet flexibility to make a big move.
That almost came when Pfizer and Allergan plc (NYSE:AGN) came to terms on a buyout. However, the $160 billion deal fell through in 2016 thanks to new U.S. legislation relating to inversion laws. Allergan — best-known for Botox — would have been a great addition to Pfizer.
Pfizer could still target other companies, but on its own, it’s terribly underrated.
Pfizer yields just about 4%, and the company is expected to grow earnings in high single digits this year and next. Analysts expect 5.6% annual EPS growth over the next five years. That’s not robust, but it is the type of steady growth that fuels steady returns that many conservative dividend investors crave. The fact that PFE trades at just 12 times forward earnings makes it that much better.
Low valuation and a fat yield? There’s plenty to like here.