The market appears to be recovering from its significant January lows of 15,400. Volatility has calmed down and the market is soaring again, and all is good in the world. Well I don’t know about that last part, but I do know that when markets rise, it can be very difficult to find deals and bargains on good, dividend paying stocks. However, that still did not stop our momentum. I don’t worry or fret over the possible lack of deals when the overall market is up because I do not buy the market, I buy individual stocks, and I believe every stock is its own individual market. Depending on news, individual stocks or certain sectors or industries can move against the market’s current upward trend and create possible opportunities. This is precisely what was happening with our recent purchase.
On March 17, 2016, I purchased 18 shares of Pfizer Inc (PFE) for $29.10 per share, plus $4.95 commission, for a total investment of $528.75.
Pfizer is one of the largest biopharmaceutical companies in the United States, and produces the well-known drugs Lipitor, Lyrica and that “little blue pill”, Viagra. Pfizer also distributes over-the-counter products such as Advil, Robitussin and Nexium, just to name a few. Its products are distributed worldwide.
I purchased this product for several reasons. The first, and most important, was the valuation. The stock was trading below $30.00 and my purchase price was a little more than $1 off its 52-week lows. I always look to initiate positions when they are rebounding off of their 52-week lows.
Second, I like the dividend and the dividend coverage on Pfizer. At $1.20/share dividend, the yield, based on my purchase price of $29.10, stands at a very juicy 4.1%. Pfizer was once a Dividend Aristocrat, but was removed from the list in 2009 after a cut from .32 to .16 cents during the recession. However, as the saying goes, “Past performance does not guarantee future results”. When testing the stability and longevity of a dividend, I look at Free Cash Flow, and boy, does Pfizer have tons of it. For year ending 2015, Operating Cash Flows were $14 billion and CapEx stood at a mere $1.3 billion. This leaves plenty of room for future dividend growth.
Lastly, this purchase gives the New Life Portfolio some diversification, as this serves as my entrance into the Healthcare Industry. I like the Healthcare sector, as I consider it a safer investment. Even during economic declines and recessions, people will not give up their medication and medicinal needs.
While top-line revenues have dipped slightly from 2012 ($58 billion) to 2015 ($48 billion), I like the share buyback plan that is currently in effect. This will reduce share count, helping to increase Earnings Per Share, and securing the dividend. Pfizer also will join forces with the pharmaceutical company Allergan (AGN), making the company even larger and increase Pfizer’s pipeline of products.
This purchase adds $21.60 to the TOL’s forward dividend income, pushing us over the $250 mark for dividend income, now sitting at $256.42. We look forward to growing our passive income stream to supplement our one income household, as Mrs. TOL has transitioned to a stay-at-home-mom. We look forward to many years of collecting Pfizer dividends and will add to our position when the opportunity presents itself.