PFIZER INC. $31 (New York symbol PFE; Income Portfolio, Manufacturing & Industry sector; Shares outstanding: 6.2 billion; Market cap: $192.2 billion; Price-to-sales ratio: 4.0; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.pfizer.com) is one of the world’s leading prescription drug makers. Top-selling brands include Lyrica (epilepsy), Celebrex (arthritis pain), Prevnar (pneumonia) and Enbrel (rheumatoid arthritis). Many of Pfizer’s drugs will lose their patent protection in the next few years. To fuel its future growth, the company paid $17 billion for Hospira in 2015. Hospira makes biosimilars, which are close copies of biologic drugs (or those made from living organisms, like bacteria and yeast). Biologics differ from regular drugs, which are typically made from chemical compounds. Pfizer is also merging with Irish drug maker Allergan plc (New York symbol AGN), which is best known for its anti-wrinkle drug Botox.
Big tax savings on the way
The new firm will operate out of Ireland and will change its name to Pfizer plc (New York symbol PFE). That will also let it take advantage of Ireland’s low corporate tax rates: Pfizer’s rate would fall to 18% from 25% in the U.S. The deal faces high regulatory hurdles, and the new firm would likely have to sell some of its operations. But lower taxes and other savings should free up more cash for dividends: Pfizer’s current annual dividend of $1.20 a share yields 3.9%. Pfizer is our top Income buy for 2016.
