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Editor's Note: Below, Chief Income Strategist Marc Lichtenfeld covers a stock that has attracted a lot of attention for its COVID-19 efforts.

The pandemic has renewed investor interest in the biotech sector - and today's Rx for a healthy retirement no doubt involves investing in these innovative companies.

That's why Marc wants to make it easy for you to learn more...

He's offering a second year of his biotech research service, Lightning Trend Trader, for FREE to anyone who signs up today.

So if you want to go beyond the biggest names in the sector and find tomorrow's winners...

Click here to learn how you can join him.

- Mable Buchanan, Managing Editor

Does Pfizer's COVID-19 Vaccine Secure Its Dividend?

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

Even before the COVID-19 pandemic hit, Pfizer (NYSE: PFE) investors were likely drawn to the stock's solid dividend and history of annual payout increases.

Today, Pfizer yields 4.3% and has raised its dividend every year for 11 years.

Can it continue to do so? And will its COVID-19 vaccine help ensure that the dividend is paid and raised?

The drug giant saw declines in free cash flow starting in 2018, and only now is free cash flow expected to return to 2017 levels.

Pfizer's Free Cash Flow
 

Pfizer's payout ratio is very much under control. In 2020, the company paid out 69% of its free cash flow to shareholders in dividends.

Because free cash flow is forecast to rise to $14.8 billion this year, the company is projected to pay out just 59% of its free cash flow in dividends.

Generally speaking, a payout ratio below 75% of free cash flow is comfortable.

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COVID-19's Impact

In 2020, Pfizer generated $42 billion in sales. This year, that number is expected to shoot higher to $62 billion.

Of that $20 billion increase, $15 billion will come from the company's COVID-19 vaccine.

The following year, that figure is forecast to drop to $4 billion. Then, it'll decline to $1 billion in 2023.

So this year, the vaccine will have a profound effect on Pfizer's financials, though it will have a lesser impact the following years.

But Pfizer had no problem affording its dividend even before this windfall from the vaccine. Regardless of what happens with this particular vaccine going forward, Pfizer should have no problem paying and raising its dividend in the near and intermediate future.

Considering the company's solid payout ratio, rising cash flow and decadelong history of raising its payout to shareholders, Pfizer's dividend is safe regardless of the extra revenue from the vaccine.

Dividend Safety Rating: A

Dividend Grade Guide
 

If you have a stock whose dividend safety you'd like me to analyze, leave the ticker in the comments section.

Good investing,

Marc

P.S. Pfizer has a solid yield... but it's not my favorite healthcare stock right now.

In fact, I've got my eye on a big emerging trend that's set to change the future of medicine.

I want you to have the chance to profit from it. Click here and join me in Lightning Trend Trader, and I'll show you how.

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