Are you famous enough for picking great stocks to become a billionaire money manager? If not, you can learn a lot from the handful of people who have.
It is easier than ever for private individuals to invest together with professionals. The U.S. Securities and Exchange Commission requires anyone with more than $100 million under management to report their activities to the public every three months.
The latest round of revelations kicked off recently, and it appears that dividend-paying healthcare stocks with high yields were on the minds of America’s richest fund managers. Here’s a look at two dividend stocks that have been getting a lot of attention from billionaires lately to see if they could be a good fit for your portfolio.
1. Pfizer
Shares of Pfizer (NYSE:PFE) have fallen by about half from a peak the shares reached in 2021. In short, pharmaceutical stocks have fallen as sales of Comirnaty, the company’s COVID-19 vaccine, and Paxlovid, its antiviral COVID-19 treatment, evaporated much faster than expected.
Perhaps sensing a bargain, billionaires bought Pfizer with both hands. John Overdeck and David Siegel of Two Sigma Investments started a new position in the first quarter by acquiring 8.42 million shares. Daniel Sundheim of D1 Capital Partners also made a bold bet on Pfizer, buying 7.83 million shares for a new position.
Pfizer stock is up from its first-quarter lows, but the pharmaceutical giant still offers a juicy 5.8% dividend yield at recent prices. Investors looking for income will be happy to know that the pharmaceutical giant has made annual payout increases since 2009.
Investors can expect Pfizer to announce another dividend increase in December. The company expects adjusted earnings to be between $2.15 and $2.35 per share this year. That’s more than needed to meet the annual dividend obligation, which is currently set at $1.68 per share.
Pfizer’s stock is trading at the low multiple of about 12.9 times the midpoint of management’s 2024 earnings forecast. At this low price, long-term investors can realize market gains even if earnings advance at a snail’s pace.
In 2023, Pfizer spent $43 billion acquiring Seagen and its line of cancer therapies. Pfizer is likely to report significant profit growth in the coming quarters as it unwinds overlapping businesses. Management predicts net cost savings of $4 billion by the end of 2024.
In addition to lower costs, Pfizer’s bottom line could benefit from rising product sales. The company received a record nine new drug approvals from the Food and Drug Administration last year.
Lower costs in the near term and new product launches that could fuel growth over the next decade make this stock look like a bargain suitable for most income-seeking investors.
2. Walgreens Boots Alliance
Decades of consecutive payout increases Walgreens Boots Alliance (NASDAQ: WBA) one of the most reliable dividend stocks on Wall Street until it cut its payout from $0.48 to $0.25 per share earlier this year. The stock has fallen so far that it offers a yield of 5.5% at recent prices.
Despite announcing a reduced payout in January, Walgreens attracted several billionaire investors in the first quarter, including the recently deceased Jim Simons. His firm, Renaissance Technologies, opened a new position with 1.83 million shares. Also in the first quarter, Jeff Yass increased Susquehanna’s position by 403% to 2.43 million shares.
Retail pharmacy is, at best, a low-growth industry. With the increasing use of lower-cost online pharmacies, such as Mark Cuban’s Cost Plus Drugs, and the pressure on the profit margins of companies that manage pharmacies, investors probably shouldn’t expect significant growth from Walgreens’ largest operating segment.
Walgreens’ attempt to be more than a pharmacy chain and offer healthcare services has been a disaster. The company invested $5.2 billion in VillageMD in 2021, only to close 160 clinics this year and record a $5.8 billion impairment charge.
Pharmacy retail doesn’t seem like a smart place to put your money. Despite the interest from billionaire investors, it’s probably best for the rest of us to avoid Walgreens stock until we see evidence that it can drive the vertical integration of a related company.
Should you invest €1,000 in Pfizer now?
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Pfizer. The Motley Fool has a disclosure policy.
Billionaires are buying these high-yield dividend stocks left and right. Should you follow their lead? was originally published by The Motley Fool
