Last update on 2024-06-27

Pfizer Inc (PFE) - Dividend Analysis (Final Score: 4/8)

Pfizer Inc (PFE) dividend analysis scored 4 out of 8. Performance evaluated using dividend policies, yield, recovery, and payout ratios. Investors get insights on stability.

Short Analysis - Dividend Score: 4

We're running Pfizer Inc (PFE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

This dividend scorecard evaluates Pfizer Inc. (PFE) using 8 criteria to see how well and stable their dividend policy is. Pfizer scored 4 out of 8. Some high points are that Pfizer's dividend yield is significantly above the industry average at 5.6964% and that the company's dividends have increased stably over the last 20 years. However, the payout ratio at 81.41% is over the ideal 65%, suggesting they might not be reinvesting enough back into the company. There are also some inconsistencies in dividend coverage by earnings and cash flow in recent years. Despite these fluctuations, Pfizer has been reliable in paying dividends for more than 25 years.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Pfizer might be a solid choice for income-focused investors due to its high and stable dividend yield. However, potential investors should be cautious about the higher than ideal payout ratio and recent inconsistencies in dividend coverage. It could be worth exploring further before making an investment decision. If stability and conservative growth are more important to you, you might want to look at other options as well.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is the ratio of a company's annual dividend compared to its share price. It offers insight into the income generated from an investment at the current share price. A higher dividend yield relative to the industry often indicates a potentially higher return on investment.

With a current dividend yield of 5.6964%, Pfizer Inc. (PFE) significantly outperforms the industry average of 3.29%. This is noteworthy for potential and existing investors seeking income, as Pfizer's yield is substantially above the industry benchmark. Over the past 20 years, Pfizer's dividend yield has fluctuated, with lows in the 1.6983% range (2003) and spikes over 7% (2008). Stable and increasing dividends per share, from $0.5693 in 2003 to $1.64 in 2023, coupled with relatively stable stock prices suggest resilient and strong dividend policy. Additionally, compared to volatile historical industry yields peaking over 100%, Pfizer’s more stable high yield can be interpreted as a positive, portraying Pfizer as an attractive option in terms of yield reliability. Overall, this trend is good for income-focused investors as it represents both a competitive yield and a commitment to rewarding shareholders.

Average annual Growth Rate higher than 5% in the last 20 years?

explain the criterion for Pfizer Inc (PFE) and why it is important to consider

The Dividend Growth Rate is higher than 5% in the last 20 years based on given dividend per share ratios.

Average annual Payout Ratio lower than 65% in the last 20 years?

The Average Payout Ratio considers the proportion of earnings a company pays to shareholders in the form of dividends. A ratio lower than 65% is usually favored, indicating a good balance between rewarding shareholders and retaining earnings for growth.

Pfizer Inc's average payout ratio over the last 20 years stands at approximately 81.41%. This figure exceeds the ideal threshold of 65%, suggesting that Pfizer is paying out a significant portion of its earnings as dividends. While high payout ratios can be attractive to income-seeking investors, it raises concerns about the company's ability to reinvest sufficient earnings into future growth and stability. Notable spikes in payout ratios were observed in 2003, 2007, 2008, 2015, 2016, and particularly in 2023 when the ratio spiked dramatically to 436.751%. Such inconsistencies point towards periods of earnings volatility, dividend policy shifts, or possibly special dividend payouts. This trend may be seen as a red flag, particularly if the company isn’t adequately reinvesting in its business or if profitability declines.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Covering dividends with earnings is a crucial test of financial health that indicates whether a company's profits are sufficient to meet its dividend obligations. For Pfizer, the Earnings per Share (EPS) vs. Dividends per Share (DPS) ratio between 2003 and 2023 has displayed inconsistency. Recent years have shown significant swings, most notably in 2021 and 2022, where the EPS was significantly higher than dividends, indicating positive coverage. However, years like 2023 saw poor coverage, thus raising concerns. These oscillations suggest the need for a cautious outlook on Pfizer's dividend sustainability.

Dividends Well Covered by Cash Flow?

Covering dividends through cash flow is crucial because it indicates if the company can yield returns to shareholders from its generated cash without incurring additional debt.

Analyzing the data from Pfizer Inc (PFE), we see disparities over the two-decade span. The coverage ratio has largely remained below 0.75, showing sustainable dividends coverage while maintaining cashflow for reinvestment. However, irregularities like the dip in 2021 with a mere 0.29 coverage or the peaks above 1.0 in 2023 must be delved into for stability assurance. The recent uptick in 2023 at 1.93 signals strong cash flow adaptability despite fluctuating figures which warrant a paramount importance given divisive market trends.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, measured by the change in dividend per share over the past 20 years, is crucial for income-seeking investors. If the dividend per share did not drop by more than 20%, it indicates a reliable income stream.

The analysis of Pfizer's dividend payments over the past 20 years shows that there has been effective management in maintaining stable dividends with only one notable drop in 2009. In 2009, the dividend per share decreased to $0.759 from $1.2144 in 2008, a significant drop exceeding 20%. While there have been increases in other years, such a drop reflects adversely on stability. The downturn in 2009 can be estimated a strategic adjustment given the Great Recession impact around that time. Despite this instance, stability in subsequent years with continual increments up to $1.64 in 2023 suggests a resilient recovery and overall strong management in the dividends payout policy.

Dividends Paid for Over 25 Years?

Explain the criterion for Pfizer Inc (PFE) and why it is important to consider

This criterion looks at whether Pfizer has consistently paid dividends for over 25 years. Consistency in dividend payments indicates financial stability and commitment to sharing profits with shareholders. Pfizer has a strong historical record of paying dividends every year from 1998 to 2023. This consistency showcases Pfizer's resilience and reliability as a dividend-payer, making it attractive for income-focused investors. The trend of increasing dividends over the years, although with some fluctuations, further underscores its reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Why is reliable stock repurchases important to consider for Pfizer Inc (PFE)?

Reliable stock repurchases over the past 20 years is a testament to a company's commitment to returning value to its shareholders. Companies with consistent buyback programs are often seen in a positive light because it signals confidence in the business's future and the undervaluation of their shares. For Pfizer Inc. (PFE), reliable share repurchases could indicate strong cash flow management and a shareholder-friendly approach.