This “Once a Decade” Dividend Bargain is Here, Again!

Brett Owens, Chief Investment Strategist
Updated: August 30, 2023

Cough. Cough. “This latest variant is legit,” I sputtered to my wife.

This was a school year and a half ago. The kids were home sick—again. Our little super spreaders had kindly brought home the latest coronavirus model.

Or so I thought. We soon learned it was Respiratory Syncytial Virus (RSV) going around town. RSV is highly contagious and, while the Internet lists its symptoms as mild, it wouldn’t be my choice for our next family illness. RSV lingers like an out-of-town relative without a return flight.

Generally, RSV runs its course. But it’s nearly impossible to avoid unless you avoid people—which may or may not be an option.

Enter Abryvso, a new RSV vaccine which gained FDA approval for pregnant women last week. Infants are susceptible to respiratory illness from the virus—so parents may opt to get mom vaccinated so that immunity is passed to the infant. (Abryvso was approved for individuals 60 and older in age in May.)

Abryvso is a creation of “vaccine machine” Pfizer (PFE). And while this isn’t an ad for the shot, it is a commercial for PFE the stock.

The blue-chip pharma stock trades for less than 10-times earnings. It yields 4.5%, which beats the 10-year Treasury. PFE goes on sale like this once in a blue moon. When the stars align, we call out the PFE bargain in these pages.

As we did the last time the stock was this cheap in April 2020. (Sigh. The obligatory sigh when anyone mentions 2020.) Back then, I said it was a once in a decade sale. My bad—three years later, PFE is cheap again, paying 4.5%.

I know, I know. Four-and-a-half isn’t the 8% “No Withdrawal” type of yield we’re used to. But this is Pfizer, and four-plus is about as good as it gets.

Before that, we can look to 2009 and 1987 as other times that PFE was this cheap. After the stock market crash of 1987, PFE shares yielded 4.3%. That was, needless to say, a great time to buy the stock. What happened?

March ’09 was another bargain moment in PFE. Investors who dumpster dived for Pfizer locked in an incredible double-digit yield. They also quadrupled their investment over the next 11 years.

Well, here we go again. PFE yields 4.5%. Anytime it pays 4.5% or more, it proves to be a screaming deal.

We had more chances to buy PFE at these divvy levels even after the financial crisis, the most recent in October 2011. Shares took off, and the drug maker’s yearly dividend raises couldn’t keep up:

Recent Times PFE Paid 4.5%+

Since the start of 2010, PFE has paid more every year—up 128%! It’s a buy-and-hold investors’ dream, but we can do even better with some light market timing. Like buying PFE only when it pays 4.5% or more, “bottomy” opportunities indicated by the arrows above!

Worries about PFE’s pipeline persist through the decades. Wall Street pundits—with biology expertise that peaked in high school—lament the firm’s lack of future blockbuster drugs. A dry pipeline is usually the refrain.

Pharma sentiment swings quickly. Just 19 months ago, PFE shares were peaking so the stock paid only 2.1%. Bullish euphoria from the company’s widely distributed COVID vaccine hit a high point.

The yield was quite a contrarian indicator! Shares were clearly dear. Two dividend raises later, the price dropped and the stock is cheap, trading for less than ten times earnings.

Vanilla investors, ironically, aren’t interested. The herd bought the blue chip at 2.1% but ignore 4.5%!

Sure, PFE’s headline numbers are lackluster, with revenues sliced in half as demand for its COVID vaccines and pills fade. But its non-COVID products are being fast tracked. The stock is at an inflection point where new products will take the baton.

We contrarians are happy to consider the bargain. Sure, the stock market is in the middle of a correction. We’ve been waiting for this, favoring boring dividend payers.

The beauty of PFE today is that it has already been discarded. Kicked to the curb. Ready to attract the basic thinkers again as they scramble for “safe stocks” to buy in the usual September pullback.

PFE delivered a “disappointing” earnings and sales outlook on August 1. Since then, the stock has gained 2.2% while the S&P 500 has shed 3.6%. (There’s some beta for ya!)

When a stock no longer tanks on bad news, that’s big-time bullish. PFE is on a heater, rolling out 19 new products in 18 months. In total, CEO Dr. Albert Bourla projects $20 billion in annual sales by 2030.

Wall Street says it is skeptical. “Serious challenges lay ahead for Pfizer!” Well, some wise guys and gals have been accumulating shares since the “bad outlook” dropped at the start of the month. They’re not waiting for the news to get better.

The smart money is buying now and collecting 4.5% while it waits. We contrarians should do the same.

And hey, who says we can’t blend our 4.5% PFE yield with other “No Withdrawal” Retirement Portfolio plays to net that 8% dividend we’re looking for?

Eight percent payers make retiring so much easier. At 8%, we’re receiving $80,000 per year in dividend income alone. Plus, we needn’t touch our capital!

Please read on so I can explain my favorite 8% “stealth plays” to buy today.