After 41 years of regularly increasing its dividend, the beleaguered drugmaker has kept the payout steady at 32 cents a share as it looks to preserve cash in the face of the looming Lipitor patent expiration in 2011. Pfizer ceo Jeff Kindler actually signaled recently that the dividend would, at the least, be maintained. Some may find the move disappointing, but of course, this is not the same thing as reducing the payout, which some Wall Streeters earlier this year thought would occur.
Why? The $8 billion in dividend payments Pfizer made to shareholders last year is widely considered to be the biggest reason many investors still hold the stock. Put another way - Pfizer shares aren't attractive for the pipeline. To maintain the payout, some analysts speculated Pfizer may have to repatriate off-shore cash, driving up its tax rate. Remember that Lipitor contributed 65 percent of Pfizer’s free cash flow last year. This is an issue, because the dividend can only be paid from US funds.
For those who complain there was no increase despite a $26 billion cash hoard, remember that the Pfizer board has been divided about whether to pursue a big acquisition (back story here). Preserving cash can also mean preserving options.