With a 5.6% dividend yield, Pfizer is currently the highest yielding stock in the Dow Jones Industrial Average and ranks 20th in yield on the S&P 500. As a point of comparison, 30 Yr treasuries and the Lehman Aggregate Bond Index are yielding about 4.5%. The Lehman Corporate Bond Index is yielding 5.55%. So is it the time to buy PFE?
Maybe in a volatile market like we have been experiencing, it is good to look for yields like Pfizer's. The healthcare sector is a traditional defensive play during an economic downturn. People still need to take their meds and a good dividend is a hedge against downward movement. In the 1990-91 recession, the S&P Healthcare Index gained 22%. During the 2001 recession, the index fell 1.3% but was the second best performing sector overall (only the S&P Materials index has a positive return).
Here are the top yielding stocks in the S&P Healthcare Index:
Data provided by Reuters
Both Pfizer and Bristol Myers offer high yields. Both are trading at PEs below the sector average of 24. BMY has been beaten up a lot lately and the analysts are projecting good growth between this current fiscal year and the next year giving it a more attractive PEG. According to Thomson Financial, if you look at the analyst picks, BMY has 7 buys, 12 holds and no sells. PFE has 9 buys, 12 holds and 2 sells.
Looking at their charts, they both are trending downward. Pfizer's 200 day moving average turned south back in June of last year while BMY went downward in January.