Is Pfizer A Good Dividend Stock?

Pfizer Inc. (NYSE:PFE) is a long-standing American pharmaceutical company that was founded all the way back in 1849 by Charles Pfizer and Charles F. Erhart. It since grew to become a global enterprise and one of the largest drug companies in the world. It’s a component of both the S&P 100 and S&P 500 and executed a series of mergers over the past 20 years to become the company it is today.

When the coronavirus hit, the company crashed with the rest of the market, and it’s been up and down since. It’s a leader in the COVID-19 vaccine race with two mRNA candidates being fast tracked through Phase 3 clinical testing by the Food and Drug Administration. It also has a pipeline of drugs and partnerships to diversify its sales well beyond coronavirus vaccines.

A case can be made for investing in the company based on future prospects and past performance. But for income-oriented investors, is Pfizer a good dividend stock?

It’s one of few companies that’s experiencing neither an all-time high nor all-time low market cap sitting above $200 billion in 2020. Even at the worse of the pandemic, it only dropped to a 52-week low of $27.88 from a high of $40.97 back in 2019.

It even increased its dividend payout to $1.52 in 2020, representing a 4.1 percent dividend yield. However, it’s unstable pricing could dilute some of the value of these payouts. 

Is Pfizer Dividend a Value Trap?

Pfizer is one of the oldest corporations in the U.S., and its 2019 revenue of $51.75 billion indicates the strength of its manufacturing, distribution, and sales channels.

It also has a relatively stable price that stayed between a range of $20-$40 through the past decade while paying out dividends every quarter and raising them by $0.02 per year.

Its long-term dependability is one of its biggest strengths, but it’s also been turbulent in the short term, and day traders never know whether the stock will be up or down on any given day.

This pricing volatility is one of the reasons some analysts think Pfizer dividends aren’t the value you want to believe.

If you use a dividend reinvestment plan (DRIP), for example, you want the dividend distribution to buy stock at its low point.

With a volatile stock price that moves from $20 to $40, having that dividend buy stock at its low point of $20 would effectively double it.

Of course, that’s all a simplified explanation. Time to dive deeper into Pfizer’s dividend schedule to illustrate.

Pfizer Dividend Schedule

Pfizer stock pays a quarter dividend and divided the year into the following four quarters for the past 40 years:

·       Q1 – Declaration Date: April 20-30, Effective Date: May 5-15, Record Date: May 5-15, Payment Date: June 1-10

·       Q2 – Declaration Date: June 20-30, Effective Date: July 30-August 5, Record Date: July 30-August 5, Payment Date: September 1-10

·       Q3 – Declaration Date: September 20-30, Effective Date: November 5-10, Record Date: November 5-10, Payment Date: December 1-5

·       Q4 – Declaration Date: December 20-30, Effective Date: January 25-Feb 1, Record Date: January 30-Feb 5, Payment Date: March 1-10

What this means is you’ll need to be holding the stock in early May, late July, Early November, and late January to receive the dividends in the following month.

You want a low stock price leading into the effective dates to buy in and a lower price in June, September, and March, followed by an upward swing before it continues.

If the stock follows this pattern, you can maximize your profitability, which is how short-term day traders make the most money from the stock.

In 2020, however, this dip only occurred during the September dividend payout. In fact, the June dividend paid out right before the stock shed over 12 percent of its market value.

This happened after the coronavirus crash caused the same issue in March. This meant your DRIP bought high and crashed, leading some bearish investors to cry that it the company is a value trap. However, the same coronavirus that devastated it may also bail the company out.

Pfizer Dividend Yield

Pfizer steadily raised its dividend by $0.02 every year going back to at least 2013.

At that time, it paid $0.24 per share, which was raised to $0.38 per share through 2020. If the company continues this pattern, its declared dividend in December 2020 should be $0.40 scheduled for an early Mach payment.

Assuming the company’s COVID-19 vaccine is approved over the coming months, the price is likely to be on the higher end by that time. However, bullish investors are working with the assumption that they’ll receive at least $1.52 next year, with the possibility of it raising to $1.60.

Next up, we’ll explore the company’s dividend payout ratio.

Pfizer Dividend Payout Ratio

Pfizer hasn’t missed a quarterly payment since 1980, and it raised its dividend payment for the past nine years leading up to the coronavirus pandemic.

The stock’s P/E ratio is 14.85 percent, and it has a 4.1 percent annual dividend yield. This is why it’s considered a sustainable long-term investment that can grow over time. Although the company’s market cap is volatile, these dividend payments keep your investment leveled out.

Heading into the holiday season of 2020, Pfizer’s dividend yield could be a haven for those reeling from the drop in tourism and retail.

Is Pfizer a Good Dividend Stock?

Pfizer is over a century old pharmaceutical company that grew to become one of the largest of its kind in the world. Its portfolio of brands include Viagra, Advil, and Robitussin, and it has two COVID-19 candidates in late-stage clinical trials with the FDA as part of Operation Warp Speed.

It also has a 40-year history of consistently paying quarter dividends, with nearly a full decade of consecutive dividend payout increases.

Although the stock price is volatile, these dividends help keep your investment growing. Pfizer is a great long-term investment for those not looking at its daily activity. It’s also a great stock for day traders who thrive on constant changes. Just be sure to invest at the right time to maximize your profits.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.