Dividend Stock Wednesday: Pfizer (PFE)

Note: I use a combination of the Stock Selection Guide Software and its methodologies from the CSA and my own investment approach to perform the bulk of my analysis on stocks. This is not a recommendation to buy a stock – it is my analysis only. Please do your own research.

This weeks dividend stock analysis is one that used to be a read high flyer but recently has not had very good growth. However, it is a strong dividend stock that has consistently increased its dividends every year for more than 25 years, making it a part of the S&P 500 Dividend Aristocrats.

The company has been involved in extensive cost-cutting efforts which could give Pfizer the opportunity to generate more profit for each dollar of sales that it brings in. There are also some potential blockbuster products in the pipeline, however banking on these results is a risky game as one never knows what the results of clinical tests – they can go either way. The company also continues to face increasing competition from generic drug manufacturers which could impact profits greatly. In addition, the sheer size of the company makes it difficult to increase both sales and revenue at a high rate.

Based on my analysis of the stock, I think the stock is currently overpriced. The dividend growth is good, but that does not mean we should overpay for a stock, no matter what. Below are two images that present the results of my analysis. Page 1 is the data sheet and page 2 is a description of each of the fields and how the scoring works.

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Overview:

The Dividend Guy Rating: 7 out of 10 (I look for at least 7 out of 10)
Buy Price Range: $15.98 to $22.17
Current Price: Overpriced
Dividend Growth Rate: Meets my 10% growth rate requirements with a 11.48%
EPS and Revenue Growth: The EPS growth over the past 5 years has been very strong, but over the past 10 years both earnings and revenue has been not as consistent as I typically like to see.

Pfizer is a tough stock to analyze. The dividend growth is very strong and makes it quite attractive. In addition, from a long-term historical perspective the valuation looks cheap. However, given the poorer performance in both the revenue and EPS growth rates in the past 3 years, it makes it difficult to project a very strong growth rate. I have also added in a 30% buffer in my analysis to allow for significant drops in share price. Pharma stocks can be quite volatile. I am not going to be adding any Pfizer to my portfolio at this time at these prices.

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The Dividend Guy owns shares in Pfizer