I have just added Pfizer to my dividend growth portfolio.
- First aspect I liked is the 4% dividend yield coupled with a growth history going back to 1980. The company only uses 50% of it’s Free cash flow to cover the payment so it’s very safe.
2)What about the future? Well with an aging population and limited competition for specific oncology drugs, you can make the argument that this company will be able to generate regular rich cash flow. I expect the annual dividend growth to be between 5 to 8% during the next 5 years. With a current 4% yield you’re looking at 9 to 12 % total return, which I find very attractive given current valuation in the market.
3) What is the risk? With those big pharmas you know that the R&D cost a lot of money. Developing better drugs is a lengthy process, so you need to have a good percentage of attempts to be converted to patented 20 years exclusivity ….