For many years, income-oriented investors have counted on healthcare
giant Pfizer (NYSE:PFE) stock to provide reliable dividend distributions.
In fact, it’s not unreasonable to say that this is among the main benefits of holding PFE stock for the long term.
However, nothing in the markets is 100% reliable and some folks have been talking about a Pfizer dividend cut.
Is there a dividend payout reduction coming? In light of an important merger in the health-care sector, Pfizer’s stakeholders should know what to expect.
As we’ll see, there’s no need to lose faith in the company or the stock. Income and value investors alike should continue to rely on Pfizer as a premier business that consistently rewards its loyal shareholders.
A Closer Look at PFE Stock
Speaking of value investing, PFE stock’s trailing 12-month price-to-earnings ratio is currently 19.83.
That’s quite reasonable as it suggests that the stock’s price is justified by the company’s profits.
As far as the price action of the stock is concerned, investors should watch for an important resistance level at $43.
The PFE stock bulls attempted to break through that level in the year 1999, and then again in 2000.
Other attempts were made in September 2018 and December 2020, but those also failed.
This is why Pfizer’s dividend distributions are so important. Without them, the long-term investors might not have much to show for their loyalty to the company.
As of May 4, PFE stock settled at $39.15 and appeared to be drifting sideways. It will open today at around $38.85.
Something tells me, though, that a major bull run could ensue if that long-standing $43 resistance is finally shattered.
A Major Merger
It was a huge development when Pfizer’s generic drug business, Upjohn, completed its merger with Mylan on Nov. 16, 2020.
Nowadays, if you try looking for Mylan stock, you won’t find anything. In its place, you’ll find the company that resulted from the merger, Viatris (NASDAQ:VTRS).
As a result of the business combination, Pfizer shareholders were given the option to receive Viatris shares.
When Viatris initiated its dividend program, Pfizer stated that it would reduce its dividend payouts.
So, we can’t blame people for talking about a Pfizer dividend cut. This wasn’t just a baseless rumor, but an expectation issued by the company itself.
There was talk that Pfizer would reduce its annual dividend to around $1.51 per share. That would still be a pretty good dividend for a $39-ish stock.
Perhaps by now, you’ve just accepted the dividend reduction as a reality. I’m glad that you’ve reached the acceptance stage, but a recent announcement should offer income-focused investors a reason to celebrate.
A Dividend, Undivided
No doubt about it: Pfizer knocked it out of the park when the company reported its first-quarter 2021 fiscal results.
We’re talking about revenues of $14.58 billion, beating the $13.51 billion expected by Wall Street analysts (according to Refinitiv).
Moreover, Pfizer posted adjusted earnings of 93 cents per share, easily beating the 77 cents that the analysts were expecting.
Perhaps it’s possible that Pfizer’s outstanding financial performance enabled the company to forgo its planned dividend cut.
That’s right: despite the planned declaration of a dividend payment by Viatris, Pfizer’s board chose to maintain the company’s quarterly dividend at its current rate of 39 cents per share.
Astoundingly, Pfizer’s second-quarter 2021 cash dividend will be the 330th consecutive quarterly dividend paid by the company.
Now, that’s what I would call a true dividend king – and a rock-solid company that stands by its shareholders.
The Bottom Line on PFE Stock
Investors really shouldn’t underestimate the importance of Pfizer maintaining its current dividend payout rate.
It says a lot about the company. And, it’s a sign that value and income seekers are doing the right thing by parking their capital in PFE stock.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the biedexmarkets.com.com Publishing Guidelines.