We recently published a list of The 10 best dividend paying stocks under $50. In this article, we take a look at how Pfizer Inc. (NYSE:PFE) compares to other dividend-paying stocks under $50.
The uptrend that had been ongoing since October 2022 was interrupted in early August. Investor sentiment changed as concerns about the strength of the U.S. economy grew. This change was sparked by an employment report that showed modest job growth in July and an increase in the national unemployment rate. These figures sparked concerns about potential economic challenges and doubts about whether the Federal Reserve had acted too slowly in implementing expected interest rate cuts designed to support the economy. As a result, stock markets posted sharp declines for several consecutive trading days. The broader market fell 3% between August 2 and 5.
According to analysts, despite the recent market decline, there is no reason for equity investors to become overly cautious. The outlook remains positive and it is still considered an opportune time to invest. For those holding cash, this period presents an opportunity to convert capital into longer-term assets. Positive investment trends, particularly in AI but also beyond, provide ample opportunities for equity growth. In addition, rising dividends are another attractive element for investors to consider. Although dividend stocks have underperformed the overall market recently, they remain a popular choice due to their long-term returns. The Dividend Aristocrats Index is up just over 6% this year, but dividend growth among U.S. companies is promising. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, forecasts a 6% increase in dividend payments in 2024, following a 5.1% increase in 2023.
Also read: 10 stocks with the highest monthly dividend payment
Dividend growth has been a trend this year compared to last year. In the first and second quarters of 2024, dividend payments by U.S. companies increased significantly. According to Silverblatt, the performance of large-cap companies was the key takeaway from both quarters. In April, Alphabet began paying a $9.3 billion dividend, joining other major first-quarter dividend initiatives such as Bookings at $1.2 billion, Meta Platforms at $4.4 billion, and Salesforce at $1.5 billion. These initiatives contributed to 53% of the S&P 500’s year-to-date reported dividend increase. Although earnings without these new initiatives already set a record for the broader market’s 2024 dividend payments, the additional upfront dividend payments are expected to significantly boost payouts and cause both investors and nonpaying boards to rethink their strategies.
Dividend stocks have historically been a significant contributor to overall market returns. According to a report from Hartford Funds, dividend income has averaged 34% of total market returns from 1940 to 2023. Analysts have long studied various dividend strategies to maximize investor returns. While high dividend yields have attracted considerable attention, dividend growth has proven to be a more reliable approach. However, recent research shows that combining yield and growth strategies can provide the greatest benefits. The High Dividend Growth Index, which tracks companies with the highest projected dividend yield growth in the broader market and a history of maintaining or increasing dividends for at least five years, is up nearly 20% over the past year. This performance beats that of the Dividend Aristocrats Index, which focuses solely on dividend growth without considering yields.
Investors should carefully consider what fits their portfolio, as strategies that are effective at one time may not work well at another. When making investment decisions, it is important to consider the underlying fundamentals of a company. In this article, we take a look at some of the best dividend stocks under $50 according to analysts.
Our methodology:
For this list, we selected dividend stocks with a share price below $50 (as of August 16). From this group, we selected stocks with a projected upside potential of over 10% based on analysts’ price targets. We further narrowed the list by including stocks with a dividend yield of at least 2% (as of August 16). Stocks are sorted in ascending order of their upside potential (as of August 16).
We also measured hedge fund sentiment on each stock, based on Insider Monkey’s database of 912 funds as of Q2 2024. Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
A medical technician wearing protective gloves and a mask mixes a biopharmaceutical solution.
Pfizer Inc. (NYSE:PFE)
Upside potential on August 16: 19.54%
Share price at the end of August 16: USD 28.3
Pfizer Inc. (NYSE:PFE) is a multinational pharmaceutical and biotech company based in New York. The company saw significant gains during the pandemic, primarily due to its vaccine revenue, with a nearly 60% increase from June 2020 to June 2022. However, it has struggled to maintain that momentum since then, posting a 22.8% decline last year. On the positive side, recent earnings reports indicate that the company is showing signs of a growth recovery. In the second quarter of 2024, the company reported revenue of $13.3 billion, up 4.3% from the same period last year. The strong 14% increase in non-COVID operating revenue in the second quarter also underscored its continued commitment to effective commercial execution.
Although Pfizer Inc. (NYSE:PFE) has fallen significantly over the past year, Parnassus Investments has shown reasons to include the stock in income portfolios. Here’s what the company has to say about PFE in its Q1 2024 investor letter.
“During the quarter, we added new positions in Pfizer Inc. (NYSE:PFE), NICE and Charter Communications. We bought Pfizer to capture the upside potential of a turnaround following the COVID-induced boom-bust cycle of recent years. Pfizer’s share price declined more than 40% in 2023 as COVID-19 vaccine revenues declined, which presented an attractive entry point for us. The company completed its acquisition of Seagen, which should strengthen Pfizer’s antibody drug conjugate (ADC) pipeline. Pfizer also offers an attractive dividend yield.”
Pfizer Inc. (NYSE:PFE) has a strong dividend history, as the company has never missed a dividend for 85 consecutive years. Moreover, it has increased its payouts every year for the past 14 years, making PFE one of the best dividend stocks under $50. In the first six months of the year, the company has paid out $4.8 billion to its shareholders in the form of dividends. It currently offers a quarterly dividend of $0.42 per share and has a dividend yield of 5.94% (as of August 16).
Pfizer Inc. (NYSE:PFE) was a popular buy among elite funds at the end of the second quarter of 2024 as hedge fund positions in the company rose to 84 from 77 in the previous quarter, according to Insider Monkey’s database. The shares held by these hedge funds have a total value of over $3.6 billion.
Total PFE 3rd place on our list of the best dividend paying stocks under $50. While we recognize PFE’s potential as an investment, we believe some highly undervalued dividend stocks promise higher returns and do so in a shorter time frame. If you’re looking for a highly undervalued dividend stock that has more promise than PFE but trades at less than 7 times earnings and yields nearly 10%, read our report on the dirt cheap dividend stock.
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Disclosure: None. This article was originally published on Insider Monkey.
