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Pfizer (PFE) Dividend Stock Analysis

by | Dividend Stock Analysis

Pfizer Dividend

(updated 12/08/2017)

The Pfizer dividend has been paid since 1980 and is included in the Arbor Dividend Producers / Growers List.
PFE used to be a Dividend Aristocrat until it cut its dividend during the great recession.

Price: $35.29
Current Dividend: $1.28

Dividend Yield: 3.6%
Cash Dividend Payout Ratio: 57%

Market Capitalization: 213 B
Enterprise Value: 239 B

Description

Sector: Healthcare
Industry: Drug Manufacturers – Major

Pfizer is a research-based, biopharmaceutical company whose goal is to produce healthcare products that extend and improve the lives of its customers. Prescription drugs and vaccines represent a majority of Phizer’s approximately 50 billion in revenues.

The company operates in 3 segments:

Global Established Pharmaceutical (GEP) (50%)

One half the company’s business is derived from established products that are generic, or mature, patent protected products. Products include Lipitor, Viagra, Zyvox, Celebrex, and Norvasc. Basically this segment concentrates on all the legacy established products in the developed and emerging markets.

Global Innovative Pharmaceutical (GIP) 30%

This segment focuses on rare diseases, neuroscience and pain, inflammation, cardiovascular metabolic, and men’s/women’s health in general.

Global Vaccines, Oncology, Consumer Healthcare (GVOC) (20%)

This segment focuses on vaccines, oncology, and over the counter consumer healthcare products. These are very definitive specializations that only a few companies such as Pfizer have the capability and resources to tackle.

Dividend Analyzer Checklist

(updated November 2017)

Dividend Safety Score (20/33 points)

Dividend Payout Ratio (ttm):  90%
Cash Dividend Payout Ratio (ttm): 56%   (7/12 points)
Dividend Per Share (ttm): $1.24
Cash From Operations (CFO) Per Share (ttm): $2.51
Free Cash Flow (FCF) Per Share (ttm): $2.18
Net Financial Debt: $31276 M
Total Assets: $168558 M
Net Financial Debt / Total Assets: 19% (8/12 points)
Net Financial Debt to EBITDA (ttm): 259%
Piotroski Score (1-9) (TTM): (5/9 points)

 

Profitability Score (16/33 points)

Operating Earnings Yield (ttm): 6.5% (8/15 points)
Net Income (ttm): $8374 M
Gross Profit (ttm): $40912 M
Total Assets: $168558 M
Gross Profitability Ratio = GP / Total Assets: 24% (8/18 points)
Cash Return On Invested Capital (CROIC)(tttm): 13%
Return on Invested Capital (ROIC): 8%

Valuation Score (20/34 points)

Free Cash Flow Yield (ttm): 6.2% (13/17 points)
EV to EBIT (ttm): 21.3
EV to EBITDA (ttm): 12.5  (7/17 points)
Price to Sales Ratio (ttm): 4.2
Price to Book Value (ttm): 3.6
Price to Earnings Ratio (P/E) (ttm): 26
PE 10:  24

TOTAL POINTS – (56/100) (50 is an average score)

Earnings Report: 11/01/17

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SWOT Analysis

Strengths

Strategic assets (patents), economies of scale, and barriers to entry are important competitive advantages for Pfizer. Pfizer’s global salesforce and patent-protected drugs produce large amounts of cash flow. This has provided high returns on invested capital and allowed the company to return significant cash to shareholders.

Weaknesses

Biopharmaceutical research & development is expensive, complex, and risky because it requires long periods of time to bring products to market.

Expiration of patent protection is one of Pfizer’s biggest weaknesses. In particular, the loss of Viagra (2017) and Lyrica (2019) will be large challenges for the company.

Pfizer is being squeezed from three angles.
Drug approval authorities are becoming more risk adverse.
Buyers are consolidating to increase their purchasing power and demanding lower margins.
Changes in healthcare insurance are putting downward pressure on prices.

Opportunities

Pfizer’s strong position in the industry makes it a great partner for smaller drug companies that don’t have the resources to go it alone. Large cash flows from established products provides R&D capital needed for future growth.

Threats

The majority of Pfizer’s revenues come from a highly regulated and extremely competitive industry. Threats to Pfizer include: loss of patent protection, a more rigorous FDA, managed care co-ops demanding lower prices, a lack of innovation from R&D, healthcare legislation, and litigation.

Conclusion

(updated November 2017)

Pfizer is ranked #118 overall (out of 377) and #13 (out of 31) in the Healthcare sector by the Dividend Analyzer.

 

Type of Investor / Recommendation

Large Diversified Dividend Portfolios / Can Be Considered
Looking For Exposure to Healthcare Sector / Can Be Considered
Deep Value Investors / Avoid

Portfolio Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth – None
DVB High Income – None
Arbor Asset Allocation Model Portfolio (AAAMP) – None

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Disclaimer: While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.
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