Pfizer (PFE) continues to post stagnant results, despite the fact that it spent vast sums on M&A in recent years. The company continues to promise the arrival of, on average, three blockbuster drugs each year in the coming five years. To date, investors are still awaiting the outcome of this promise, as other parts of the portfolio suffer from patent expirations.
Pfizer has the potential to deliver on growth, but its track record is not that great. While management aims to make mega-deals in the long run, I question if investors want management to pursue this route. While growth prospects can be questioned, valuation multiples are not that demanding with cash flow yields approaching 8%, as roughly half of these cash flows are paid out to investors in the form of dividends. These cash flows and the steep dividend yield mean that Pfizer remains a solid bond-equivalent investment, being available at a reasonable valuation.