Dividend stocks aren’t just for income investors. Do you want proof? Just look at Ken Griffin’s purchases for his Citadel hedge fund in the second quarter of 2024.
Griffin’s net worth is $43 billion. It’s fair to say he doesn’t need dividend income and is by no means an income investor. However, the billionaire bought at least one high-yield dividend stock in the second quarter.
A major purchase from a major pharmaceutical company
Griffin went on a big buying spree in the second quarter. He increased Citadel’s stake by 20% or more for 35 of the hedge fund’s top 50 holdings.
Most of these purchases were not high-yield dividend stocks. One notable exception, however, was Griffin’s major purchase of a major pharmaceutical company — Pfizer (NYSE:PFE). The drugmaker’s dividend yield stands at a lofty 5.8%.
In the second quarter, Griffin purchased an additional 7.89 million shares of Pfizer. This increased Citadel’s stake by 63%. Pfizer now ranks as the 14th largest hedge fund and 12th largest stock investment (the top two of all investments are exchange-traded funds, or ETFs).
Griffin has a long history with Pfizer. He first initiated a position in the pharmaceutical stocks in the second quarter of 2013. Over the years, the billionaire hedge fund manager has increased and decreased Citadel’s stake in Pfizer. But lately he seems to be jumping on the big drug company bandwagon. Griffin has increased his position at Pfizer for six consecutive quarters.
Why does Griffin like Pfizer?
To my knowledge, Griffin has not publicly commented on why he aggressively increased Citadel’s position at Pfizer. However, we can make a few educated guesses.
I’m sure he’s happy with the company’s juicy dividend. To be fair, Griffin is not an income investor. But he undoubtedly recognizes that a dividend yield of almost 6% gives Pfizer a nice head start in achieving market-based total returns.
Valuation could be another important consideration for the billionaire investor. Pfizer’s share price is still about 50% below its late 2021 peak. The stock’s price-to-earnings ratio is 10.3, much lower than the stock’s price-to-earnings ratio. S&P500 the healthcare sector’s forward earnings multiple of 19.6.
Griffin is big on diversification. Citadel’s portfolio includes no fewer than 5,816 positions. The addition to the Pfizer position may have been partly to increase the hedge fund’s exposure to the healthcare industry and the pharmaceutical industry in particular.
But ultimately, Griffin invests in specific stocks because he thinks they will make money. I suspect he’s happy with Pfizer’s long-term growth prospects. Griffin is smart enough to understand the challenges the drugmaker faces, including declining sales of its COVID-19 products and a looming patent cliff with several top-selling drugs losing patent exclusivity. However, he also knows the efforts Pfizer has made to overcome these challenges, such as investing heavily in research and development and making acquisitions to strengthen its pipeline.
Should You Also Buy Pfizer Stock?
No one should buy or sell a particular stock just to follow in the footsteps of a rich, famous investor like Ken Griffin. However, the trades of successful investors can often provide good ideas to consider. Should You Also Buy Pfizer Stock?
Growth investors probably won’t find Pfizer super attractive. While I think the big pharma company will deliver solid growth in the coming years, this likely won’t be enough to keep pace with many tech stocks and other high-growth alternatives.
Investors who are very risk averse may also want to stay on the sidelines with Pfizer. The drugmaker’s pipeline candidates could fail in clinical trials, sending its shares lower. That’s less of an issue at a big company like Pfizer, which has a deep pipeline, but it’s certainly something to keep in mind.
On the other hand, Pfizer could be a good fit for value investors. As mentioned earlier, the share is relatively cheap. If the company’s new products and late-stage pipeline programs fulfill their potential, Pfizer’s stock price could rebound nicely for the rest of the decade.
And there’s one group of investors who should absolutely love Pfizer: income investors. Pfizer’s returns are exceptional. The company appears to be in a strong position to keep the dividends flowing. No, dividend stocks aren’t just for income investors. But a high-yield dividend stock with a long track record, like Pfizer, will generally be a better fit for income investors than any other type of investor.
Should you invest €1,000 in Pfizer now?
Consider the following before buying shares in Pfizer:
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Keith Speights has positions in Pfizer. The Motley Fool holds and recommends positions in Pfizer. The Motley Fool has a disclosure policy.
Billionaire Ken Griffin benefited from this high-yield dividend stock. Do you have to? was originally published by The Motley Fool
