Investors focusing on a dividend growth investing strategy have performed better than some broader market indices, notes Prakash Kolli; here, the editor of Dividend Power concludes a 3-part special report highlighting his favorite undervalued growth stocks.
The final stock on this list of 3 undervalued dividend growth stocks is Pfizer (PFE). Pfizer traces its history back to 1849. The company has evolved into one of the largest global pharmaceutical companies in the world. Pfizer has reorganized itself over the past few years into an R&D-based company.
Read Part 1 here…
Read Part 2 here…
The company formed the GSK Consumer Healthcare Joint Venture in 2019 with GlaxoSmithKline plc (GSK), including Pfizer’s over-the-counter business. Pfizer owns 32% of the JV. Additionally, Pfizer spun off its Upjohn segment and merged it with Mylan forming Viatris for its off-patent, branded, and generic medicines in 2020.
Total revenue has more than doubled from 2020 to $92,433 billion in the past twelve months because of Pfizer’s COVID-19 vaccine, Cominranty, and the anti-viral, Plaxlovid. Furthermore, Pfizer has multiple blockbuster drugs with $1+ billion in revenue, including the Prevnar vaccine, Ibrance, Elquis, Xtandi, Vyndaqel/Vyndamax, Xeljanz, and Enbrel.
Pfizer grows organically through additional indications for existing drugs, and M&A. Pfizer has bought smaller companies with promising molecules and compounds.
Most recently, Pfizer bought Arena Pharmaceuticals for $11 billion in cash for potential therapies in immune-inflammatory diseases. Pfizer has also acquired Array BioPharma and Trillium. In addition, the company announced the acquisition of Biohaven Pharmaceutical for $11.4 billion for oral migraine therapies.
Pfizer is a Dividend Contender with 12 consecutive annual dividend increases. The forward dividend yield of about 3% is supported by a 35% payout ratio and robust free cash flow. As a result, Pfizer tends to raise the dividend at a low-to-mid single-digit rate.
Despite the market correction, Pfizer’s stock price is up about 6.38% for the year. But the rapid rise in revenue and earnings means the forward earnings multiple is 8.0X for this market leader. In addition, Pfizer will likely benefit from its mRNA vaccine technology and M&A strategy for long-term growth.
