Pfizer Inc. (NYSE:PFE) stock has been a boon for growth investors over the past year. In the last 52 weeks, the stock has surged 30%, and Pfizer has been one of the best performers on the Dow in 2013. Even with patent expirations taking a toll on the company’s revenue, growth investors have had little to complain about.
But can the same be said for dividend-minded investors? Pfizer Inc. (NYSE:PFE) offers up a nice dividend, but is this the health care stock income investors need to watch?
A history of strong dividends
Pfizer Inc. (NYSE:PFE)’s 3.3% dividend is a nice payout to investors and ranks seventh out of the 30-member Dow, but it’s only an average yield compared to other big pharma rivals. Fortunately, the company has plenty of room to grow that dividend: Pfizer’s payout ratio is only 43%, much lower than competitors such as Merck & Co., Inc. (NYSE:MRK), which sports a whopping 87% payout ratio. Pfizer’s comparatively low ratio allows the firm more flexibility in raising its dividend in the future.
That’s backed up by Pfizer Inc. (NYSE:PFE)’s attractive dividend history. The company has raised its dividend nine times since 2004, including three times since early 2011 alone, and has a long history of increasing its payout further back in the past. Once again, Pfizer stacks up well against its rivals: Merck & Co., Inc. (NYSE:MRK), by comparison, has raised its dividend just twice since mid-2004. Pfizer’s historical commitment to growing its dividend isn’t a promise of future increases, but it’s a sign that the company’s believed in rewarding long-term investors in the past.
A strong dividend history and low payout ratio are great signs for this stock, but they’re not the only components that an income investor needs to watch for. While Pfizer Inc. (NYSE:PFE) competes in the boom-or-bust pharmaceutical industry, its vast portfolio, promising pipeline, and top blockbuster drugs make it the kind of strong, steady, stable stock for the long term that dividend investors can rely on.
Power in the pipeline, but patent losses loom
A strong pipeline of developmental drugs is key for any long-term pharmaceutical investor, and few companies have a pipeline as rich as Pfizer Inc. (NYSE:PFE)’s. The firm currently has an eye-popping 74 drugs in various stages of discovery, including 24 in phase 3 studies or up for regulatory approval. That future foundation is key for income investors: With patent expirations on major blockbuster drugs such as Lipitor pressuring Pfizer’s sales, having a hefty pipeline to find the future blockbusters ensures that the company’s dividend won’t be threatened.