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Pfizer Offers Dividend Opportunity

Morningstar's Damien Conover expects steady growth for the pharmaceutical firm, which will likely lead to steady growth for the dividend

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Damien Conover: When thinking about dividends, Pfizer offers a great opportunity for investors. We think the stock is undervalued and pays a very strong dividend. Right now, the dividend yield is close to 4%. That dividend is really supported by a strong portfolio of drugs--a lot of new drugs coming into the portfolio and really not too many patent losses in the near term. So, we're anticipating relatively steady growth for the firm, and that will likely transfer into steady growth for the dividend.

When we think about its peer group, most of the large-cap pharmaceutical stocks pay out about 50% of their earnings in a dividend. Pfizer is right there with that group, and we think that will likely stay the case for the next several years. So, as earnings continue to grow, we think the dividend will grow modestly as well.

Damien Conover does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.