Linked here is a detailed quantitative analysis of Pfizer Inc. (PFE). Below are some highlights from the above linked analysis:
Company Description: Pfizer Inc. ranks as one of the world's largest pharmaceutical companies, offering a wide range of drugs across a broad therapeutic spectrum.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
PFE is trading at a premium to all four valuations above. Since PFE's tangible book value is not meaningful, a Graham number can not be calculated. When also considering the NPV MMA Differential, the stock is trading at a 106.2% premium to its calculated fair value of $16.97. PFE did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
PFE earned one Star in this section for 2.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The company has paid a cash dividend to shareholders every year since 1901 and has increased its dividend payments for 10 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $546 is below the $2,500 target I look for in a stock that has increased dividends as long as PFE has. The stock's current yield of 3.43% exceeds the 1.81% estimated 20-year average MMA rate.
Peers: The company’s peer group includes: Eli Lilly and Company (LLY) with a 2.5% yield, Bristol-Myers Squibb Company (BMY) with a 2.5% yield and Merck & Co., Inc. (MRK) with a 2.9%.
Conclusion: PFE did not earn any Stars in the Fair Value section, earned one Star in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of one Star. This quantitatively ranks PFE as a 1-Star Very Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $16.81 before PFE's NPV MMA Differential increased to the $2,500 minimum that I look for in a stock with 10 years of consecutive dividend increases. At that price the stock would yield 7.1%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $2,500 NPV MMA Differential, the calculated rate is 8.1%. This dividend growth rate is higher than the 1.1% used in this analysis, thus providing no margin of safety. PFE has a risk rating of 2.00 which classifies it as a Medium risk stock.
PFE's drug portfolio is unmatched in terms of breadth and depth in the global drug market. The company enjoys strong dividend metrics including a Free Cash Flow Payout of 54% and Debt to total Capital of 41%, both well below my desired maximums. However, the stock is trading well above my calculated fair value of $16.97 per share. This will keep me from giving it serious consideration as an addition to my Dividend Growth Portfolio.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I held no position in PFE (0.0% of my Dividend Growth Portfolio). See a list of all my Dividend Growth Portfolio Holdings here.
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Tags: PFE, LLY, BMY, MRK,
