Pharmaceutical stocks have traditionally been considered logical choices for dividend stocks; here, we look at one of the blue chips of the pharmaceutical world, selling at discounts to historical valuations, explains John Dobosz, editor of Forbes Dividend Investor.
New York-based Pfizer (PFE) is one of the world's largest biopharmaceutical companies that discovers, develops, manufactures, and sells medicines for humans and animals.
Celebrex, for treating arthritis, and Viagra, for erectile dysfunction, are two of Pfizer's best selling drugs. Other products are targeted at Alzheimer's disease, cardiovascular issues, depression, pain, respiratory ailments, and smoking cessation.
As blockbuster drugs lose patent protection, Pfizer must find new sources of growth to make up for the lower sales. What's encouraging is recent news from Merck (MRK) that it was working with Pfizer to develop new cancer drugs.
Revenue for 2014 is expected to dip 3% to $49.9 billion, with earnings inching higher by 2.3% to $2.27 per share. Earnings are expected to grow 12.9% for the year that just ended, with revenue up 15.7%.
Pfizer started trading ex-dividend for the upcoming $0.26 quarterly dividend. That amount is up $0.02, or 8.3%, from the quarterly payout last year.
Pfizer slashed the dividend by 50% in 2009, but it has hiked the quarterly amount by $0.02 every year since then and amount to 46% of forecasted 2014 EPS. Dividends have been paid without interruption since 1982.
Shares of Pfizer trade at a 15% discount to their five-year average price-earnings multiple of 15.8. Multiplying that average P/E by $2.37 in EPS produces a $37.50 stock price. Pfizer's discount to its three-year average price-sales ratio is 13.6%.
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