Last week pharmaceuticals giant Pfizer (PFE) raised distributions for a second year in a row. The company raised its dividend by 11.10% to 20 cents/ share. Pfizer cut its dividend in 2009 from 32 to 16 cents/share after it announced that it was acquiring rival Wyeth in a 68 billion dollar buyout. The company has tried to rebuild it history of consistent dividend increases over the past two years, which is a positive thing. Astute dividend investors however know that future dividend increases are supported by strong fundamentals. In Pfizer’s case, the company has a steep cliff of patent expirations on key drugs such as Lipitor in 2011 -2013. Lipitor for example accounts for 22% of revenues and its US patent expires in 2011. Analysts are expecting that cheaper generic drug substitutes to Lipitor would erode Pfizer’s market share, thus hurting profitability. Pfizer has been unable to bring in any significant blockbuster drugs to the market, which would have compensate for the losses from generic competition after patents on existing drugs expire. Instead, the company has embarked on a series of acquisitions over the past decade, by purchasing Warner-Lambert in 2000, Pharmacia in 2003 and Wyeth in 2009. These acquisitions have resulted in major cost synergies, but in no new drugs on the market. In Pfizer’s defense, in order for a new drug to appear on the market, there is a long and expensive process coupled with several FDA approvals. This being said, I would keep monitoring Pfizer’s (PFE) business conditions, in order to be prepared to add it to my portfolio once it shows a decisive turnaround.
Other companies which raised dividends and which have raised distributions for over five years in a row include:
AT&T Inc. (T) provides telecommunication products and services to consumers, businesses, and other telecommunication service providers under the AT&T brand worldwide. The company raised its quarterly dividend by 2.40% to 43 cents/share. This marked the 27th consecutive annual dividend increase for this dividend champion. Yield: 5.90% (analysis)
Realty Income Corporation (O) engages in the acquisition and ownership of commercial retail real estate properties in the United States. The company raised its quarterly dividend by 0.20% to 14.425 cents/share. This dividend achiever has consistently raised dividends for 16 years in a row. Yield: 5.10% (analysis)
Waste Management, Inc. (WM) provides integrated waste management services in North America. The company raised its quarterly dividend by 8% to 34 cents/share. This marked the eight consecutive annual dividend increase for this dividend stock. Yield: 3.10% (analysis)
Franklin Resources Inc. (BEN) is a publicly owned investment manager. The firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. The company raised its quarterly dividend by 13.60% to 25 cents/share. This marked the 30th consecutive annual dividend increase for this dividend champion. Yield: 0.90%
Urstadt Biddle Properties, Inc. (UBA), a real estate investment trust (REIT), engages in the acquisition, ownership, and management of commercial real estate properties in the United States. The company raised its quarterly dividend by 1% to 24.50 cents/share. This marked the 17th consecutive annual dividend increase for this dividend achiever. Yield: 5.20%
Pentair, Inc. (PNR) operates as a diversified industrial manufacturing company worldwide. The company raised its quarterly dividend by 5% to 20 cents/share. This marked the 35th consecutive annual dividend increase for this dividend champion. Yield: 2.20%
ABM Industries Incorporated (ABM), through its subsidiaries, provides facility services for commercial, industrial, institutional, and retail facilities primarily in the United States. The company raised its quarterly dividend by 3.70% to 14 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion. Yield: 2.10%
The Andersons, Inc. (ANDE) engages in the agriculture and transportation businesses in the United States. The company raised its quarterly dividend by 22.20% to 11 cents/share. This marked the ninth consecutive annual dividend increase for this dividend stock. Yield: 1.30%
Dominion Resources, Inc. (D), together with its subsidiaries, engages in producing and transporting energy in the United States. It operates in three segments: DVP, Dominion Generation, and Dominion Energy. The company raised its quarterly dividend by 7.70% to 49.25 cents/share. This marked the eight consecutive annual dividend increase for this dividend stock. Yield: 4.60%
The process of creating a dividend portfolio should include screening for and including only the companies with the best prospects. After all, dividend growth which is not supported by strong fundamentals is not sustainable and would not lead to financial success. In addition to that, investors should avoid overpaying for stocks and should avoid taking concentrated sector bets. Taking these precautionary steps would ensure that investors keep receiving a growing stream of dividend income even during the worst market conditions.
Full Disclosure: Long O and D
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