Most companies don't make it to the ripe old age of 172. If they do, they usually don't become one of the most talked-about organizations in the world. But most companies aren't Pfizer (PFE -0.49%).
The big drugmaker helped change the world for the better with the COVID-19 vaccine that it developed with partner BioNTech. Thanks mainly to this vaccine, Pfizer ranks as the most popular healthcare stock among Robinhood investors. It's also in the top seven companies in the world with the best corporate reputation.
However, if I had to pick one thing other than its COVID-19 vaccine that makes Pfizer stand out, my vote would be for its dividend. Here are three things every investor should know about Pfizer's dividend.
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1. It offers one of the most attractive yields in the healthcare sector
There are nearly 1,200 stocks in the healthcare sector. Only six of them have dividend yields that are higher than Pfizer's yield of 3.9%.
Dividend yield is simply the percentage of annual dividends paid divided by the stock price. Yield goes up as the stock goes down and vice versa. This inverse relationship makes Pfizer's dividend yield stand out even more. Why? Over the last 12 months, its share price has risen more than any of the six healthcare stocks with higher dividend yields.
Pfizer's COVID-19 vaccine was certainly a key factor behind the stock outperforming the other top healthcare dividend stocks. However, the company's merger of its Upjohn unit with Mylan late last year also likely helped. The deal moved a basket of low- and no-growth drugs that have lost exclusivity out of Pfizer's lineup.
2. It's dependable
Where were you in 1938? Many of us weren't even alive at that point. Pfizer, though, was already a major drugmaker that paid dividends to its shareholders. And it's paid a dividend every quarter since then. When the company's third-quarter dividend is distributed in September, it will mark the 331st consecutive quarterly dividend paid by Pfizer.
With that kind of track record, it's fair to say that Pfizer's dividend is dependable. Granted, the company did cut its dividend payout back in 2009. This move was made in connection with Pfizer's acquisition of Wyeth. However, the company quickly returned to its previous practice of annual dividend hikes.
Pfizer initially thought that it would reduce its dividend slightly due to the spin-off of Upjohn. There wouldn't have been a net effect for the company's shareholders prior to the transaction, though, because Viatris, the new entity created from the merger of Upjohn and Mylan, initiated its own dividend.
Ultimately, though, Pfizer didn't have to cut its dividend at all. The massive sales for its COVID-19 vaccine enabled the company to keep the dividend at its previous level despite losing the cash flow that had been generated by Upjohn.
3. It's likely to increase
The odds appear to be pretty good that Pfizer's dividend will increase going forward. For one thing, the company's management team remains committed to the dividend program. In Pfizer's first-quarter conference call, CFO Frank D'Amelio said that annual dividend increases were expected to continue "for the foreseeable future."
It's a lot easier for a company to boost its dividend payout when its earnings are growing. And that seems likely to happen for Pfizer. Wall Street analysts project that the drugmaker's earnings will increase by an average of more than 11.5% annually over the next five years.
The emergence of new coronavirus variants, including the highly transmissible delta variant, could fuel increased and sustained demand for Pfizer's COVID-19 vaccine. Pfizer's lineup also includes several other products with strong sales growth, such as blood thinner Eliquis, transthyretin amyloid cardiomyopathy drug Vyndaqel, autoimmune disease drug Xeljanz, and prostate cancer drug Xtandi.
Over the longer term, Pfizer could see even more growth from its pipeline candidates. As of early May, the company had 99 experimental drugs in clinical development, including 22 late-stage programs.
A little something extra
In Louisiana, there's a tradition known as lagniappe. It's where you get a little something extra thrown in. With this practice in mind, I'll give you one additional thing to know about Pfizer's dividend.
If you had owned shares of Pfizer over the last 10 years and reinvested the dividends, your total return would have been almost twice the returns the stock generated without dividend reinvestment. Pfizer's dividend could provide a lot of something extra for investors who buy and hold the big pharma stock.
