George Budwell (Pfizer):Value can come in many forms. The pharma titan Pfizer, for instance, offers investors a top-notch clinical pipeline that sports 96 total compounds and possible line extensions, a mountain of cash reserves, and one of the best dividend programs within its peer group. For retirees, though, the big-ticket item is the sheer diversity of Pfizer's revenue stream.
Unlike many big pharmas and blue-chip biotechs that derive half, or even more, of their total revenues from a single flagship product, Pfizer's immense product portfolio basically ensures that its risk stemming from patent headwinds and/or new competitive threats is far less than the industry average. In the first quarter of 2017, for instance, Pfizer didn't have a single product that made up more than 9.9% of its total sales.
Although the one particular drug -- the pain medicine Lyrica -- that composed 9.9% of the drugmaker's sales in Q1 is facing its own patent cliff, Pfizer's trio of novel cancer drugs -- Bavencio, Ibrance, and Xtandi -- should keep its top line moving in the right direction going forward. In other words, Pfizer's "strength-in-numbers" strategy is proving to be an efficient remedy against the never-ending battle with generic competition.
On the dividend side of the equation, Pfizer's yield of 3.85% is close to the top within its immediate peer group. While the drugmaker's 12-month trailing payout ratio of 102% might be a tad worrisome, Pfizer has ample free cash flows -- over $15 billion -- and cash reserves -- $14.7 billion -- to more than cover its dividend in the years to come. Simply put, a dividend reduction is a highly unlikely scenario in the near term, despite the company's elevated payout ratio.
All in all, Pfizer is a stock that offers several layers of value, making it a great pick for retirees.