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When it comes to income stocks, UK investors could be forgiven for spending most of their time researching stocks on the FTSE 100 or FTSE 250. Yet in reality, there are good dividend options listed in the US. Based on the dividend forecast by analysts, here’s one company that looks attractive.
Key details to note
I’m referring to Pfizer (NYSE: PFE), the well-known global biopharmaceutical company, with its revenues coming mainly from developing, manufacturing, and selling prescription drugs and vaccines. Its business model relies on both innovative new medicines and long-established products that generate steady cash flow.
This mix of both new and existing revenue streams makes it a good example when it comes to paying out dividends. It has a solid track record in this regard. In fact, from 2011 to 2024, Pfizer has increased its annual dividend payment each year. Currently, the dividend yield‘s 7.01%, with income paid quarterly.
Typically, the dividend per share increases each calendar year. At the moment, it’s $0.43 per quarter, but is forecast to be $0.44 next year and $0.46 the year after. Based on the current share price of $24.30, this means that in 2027 the yield could rise to 7.57%.
Of course, I don’t know where the share price will be in 2027. Therefore, it’s essential to take the projected yields with a pinch of salt. In reality, it could be higher or lower. Let’s also not forget that dividends aren’t guaranteed.
The outlook from here
I believe the forecast numbers are accurate, and the business fundamentals are strong. Even with declining Covid-related revenue, Pfizer continues to generate tens of billions of dollars in operating cash flow annually from its diverse portfolio. This easily covers its dividend obligations, with a dividend cover ratio of 2.0. This means that the current dividend can be covered twice from the latest earnings.
From the data I saw, Pfizer invests between $10bn-$12bn annually on research and development. A healthy drug pipeline supports long-term earnings growth, which underpins the dividend. So even though some might not want such high spending, it’s actually a positive for further down the line.
One concern is that the company’s exposed to regulatory changes. If new laws come in regarding certain drugs or even price controls, it could negatively impact the business. Investors need to watch out for share price swings too. Over the past year, the stock’s down 13%. Even though this isn’t a disaster, it’s still enough to wipe out the gains from the dividend for this year.
On balance, I think Pfizer’s a US stock that UK investors can consider. It can act as a diversifier to a portfolio full of UK income stocks, while still offering a competitive yield.
