Sunday, September 5, 2010

A case for Pfizer

With the recession dragging along what looks interesting? Apart from the obvious Phillip Morris international that is firing on all cylinders, Pfizer, to me is another interesting play. Given that today's interest rates are at less than 1% on savings account, anything giving you 4.5% dividend needs to be carefully examined.

The case against Pfizer has been, what is interesting about it? At 7.5 times forward earnings, Pfizer has been discounted for its Lipitor expiry and the fact that Mr.Obama is going after the health industry with all he has got. But what Pfizer has going for it is the 4.5% dividend and the fact that it is progressively integrating Wyeth into its business, cutting research cost and streamlining its business. Though selling its consumer business to JNJ looked stupid at that time, now it makes sense given that it absorbed Wyeth's consumer business instead. With the strain of the 60 billion dollar acquisition easing and the dividend slowing growing in the next few years, it might make more sense to pile into Pfizer right now rather than later.

I was a buyer of Pfizer at 14$ when the yield was 5%. At this point I am not so sure. It is still pretty cheap, but given the markets schizophrenia, there might be opportunities to buy it below 15$ again this fall.

Either way, buying into these big dividend stocks in this low interest season might be a way to play the bond market without locking yourself into bonds that already seem pretty pricey.

1 comment:

  1. Boy I wish I had bought more at 14$. Good call though. Still holding at 30+.

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