The other day, at The Oxford Clubroom — that place is like a time capsule with its dark wood and soft chairs — someone asked me about Pfizer. Yeah, Pfizer! The big name with the massive yield. Why they asked me, I still don’t know. Maybe I looked like I knew stuff.
I rattled off my thoughts, hoping I was making sense. I said it seemed like a value trap. Earnings are set to dip over the next decade. Honestly, the stock has been pretty disappointing since it hit that all-time high in late 2021. Now? It’s going for less than half of that peak. Ouch.
But income hunters — those folks love Pfizer. Why? The yield is a whopping 7.1% right now, one of the juiciest in the S&P 500. Tempting, right? Maybe too tempting.
So let’s—well, I’ll try to dig into the dividend situation. I mean, is it any better than the stock itself? That’s what I’m curious about. Here goes.
Pfizer’s cash flow — it feels like a rollercoaster. The COVID-19 vaccine was a cash machine in 2021 and 2022. But now? It’s like a dry desert. FCF, as they call it, hit almost $30 billion in 2021. This year? It’s plummeted to just $4.8 billion. Crazy drop.
Free cash flow: doubled to $9.8 billion last year, but oddly that’s still low, except for—yup, 2023. They’re saying it’ll jump to $17.7 billion this year. That’s the plan, anyway.
The dividend safety score? It’s dodgy, thanks to the negative three-year growth. And get this, we’ve gotta wait until next year for the 2022 vaccine surge to vanish from the models. ‘Til then, the safety rating takes a hit. Oh well.
Oh, about last year’s payout ratio? Pfizer handed out $9.5 billion in dividends from $9.8 billion FCF. That’s a 97% payout ratio. Yikes. But they say with expected FCF growth this year, it’ll drop to 54%. Much better.
They cut the dividend in the financial crisis era, but since 2010, it’s been rising annually. Sixteen years straight gives them a bonus point, I suppose.
Looking ahead to 2025, if Pfizer hits those rosy cash flow figures, the dividend seems safe. But if 2024 issues repeat, danger, Will Robinson! You know what I mean?
For now, though, cutting the dividend doesn’t seem likely. At least that’s my hunch. The dividend? Looking sturdier than the stock as I see it.
Anyway — wait, where was I? Oh, right. If you’ve got another stock’s dividend safety on your mind, throw the ticker in the comments.
And, just a side note: check if we’ve covered your stock. Hit “Search” on the Wealthy Retirement homepage, and off you go.
One last piece of housekeeping: Safety Net works its magic on individual stocks only — no ETFs or mutual funds or those other fancy vehicles.
So, what do you wanna chat about next?
