Bring on the payouts
Most of you are going to look at Zoetis’ 0.8% yield, scoff or snicker, and probably move right along … but hear me out. Consider for a moment that Zoetis just made its debut a few months ago, so it needs to get its bearings about it as a public company. It’s fairly uncommon to see a big dividend right out of the gate unless the company is a REIT, so I say cut it some slack.
Also consider that Pfizer still owns 80% of all outstanding shares of Zoetis. This means that as Zoetis’ share price rises and as it pays dividends, Pfizer Inc. (NYSE:PFE) is a direct beneficiary just like shareholders. Current Pfizer Inc. (NYSE:PFE) CEO Ian Read has made no qualms about beefing up Pfizer Inc. (NYSE:PFE)’s share repurchase program or paying out a significant portion of earnings in the form of a dividend in order to appease shareholders, so I wouldn’t expect anything different from Zoetis’ management. At the moment, with an annual payout of $0.26, Zoetis is paying just 19% of projected 2013 EPS. Pfizer Inc. (NYSE:PFE), comparatively speaking, is paying more than double that at 43%. I think it’s just a matter of time before Zoetis dramatically boosts its payout to reflect something similar to Pfizer Inc. (NYSE:PFE)’s payout ratio.
Zoetis’ yield may not be much to look at now, but a growing trend that has pets becoming a part of the American family has certainly given rise to a massive animal health market. Zoetis is by far the best positioned to capitalize on that trend and looks poised to deliver growing profits and payouts to shareholders in the coming years. I guess what I’m saying is that it gets four paws of approval in my book!
The article 1 Great Dividend You Can Buy Right Now originally appeared on Fool.com is written by Sean Williams.
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