Summary
If the sell-off continues, we are looking for strong support at the 200 dma.
Dividend gets hiked by 6%.
We see more mid increases coming.
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We have been long Pfizer Inc. (PFE) pretty much since the inception of the premium portfolio. We went long at about the $34.65 level. There were reservations after we bought this stock as price initially did not move with the broader industry in general. As we can see from the chart below, Pfizer was stuck for almost 3 years between 2015 and 2017 before we finally got the breakout in the Summer of this year.
What impatient investors were missing at the time was the level of share buybacks the firm was continuing to do. It is a known fact the long-term investors prefer lower prices if a growing dividend and robust share buybacks are the order of the day. The buybacks automatically increase the percentage ownership of the business for existing shareholders whereas reinvesting dividends at lower prices enable the respective investor stock up on far more shares than otherwise.
Price is now trading around the $42 handle which means its forward earnings multiple is around 13.6. When we get a lift in price in one of our portfolio positions, we periodically re-evaluate the dividend and balance sheet. We still see upside in Pfizer but may deploy the dividend elsewhere if that is what the numbers tell us. Let's dig in.
