Your Benchmark Should Be Your Investment Objective
As an aside, consider why investors traditionally invest in fixed income or bonds. These investments are never made with the expectation that they will produce high or the highest total returns. Instead, they are made because investors expect a predictable and stable yield or interest payment going forward. Not all investments are about making the most money. If that were true, growth stocks would be the only logical choice.
On the other hand, if current spendable income were your objective, growth stocks would not make a lot of sense. With a growth stock, you are totally at the mercy of the company’s price action. If you were harvesting shares in order to generate income, a down market could have devastating effects on your long-term future. In other words, you could be required or even forced into selling stocks for less than they are worth, and as a result, selling more shares than you should in order to meet your income needs. In other words, you could find yourself unnecessarily depleting your principle.
In contrast, with a dividend paying stock that has a history of raising its dividend, you could find yourself in a down market and still see your income increasing. The act of harvesting your dividends has no impact on the number of shares you own. But more importantly, you could ignore a temporary down market because you are continuing to receive the income that you need from the dividends. The price of the stock has no bearing on your dividend income stream. Dividends are paid on the number of shares you own and not the price per share.
Therefore, I believe it makes more sense for the dividend growth investor to measure their performance based on the income they are receiving from dividends. More directly stated, your benchmark might not be the goal of outperforming the overall market on a total return basis. Instead, your more relevant benchmark might be comparing how much dividend income you are receiving in comparison to the general market. As I will show later, Pfizer has consistently produced more dividend income than the S&P 500 – even during its recent low-growth phase. I will illustrate this more fully in the video portion of this article.
About Pfizer Inc. (NYSE:PFE)
The following short business description Courtesy S&P Capital IQ describes Pfizer’s businesses:
“Pfizer Inc. discovers, develops, manufactures, and sells healthcare products worldwide. It operates through Global Innovative Pharmaceutical (GIP); Global Vaccines, Oncology and Consumer Healthcare (VOC); and Global Established Pharmaceutical (GEP) segments.
The GIP segment develops and commercializes medicines for various therapeutic areas, including inflammation/immunology, cardiovascular/metabolic, neuroscience/pain, and rare diseases.
The VOC segment develops and commercializes vaccines, as well as products for oncology and consumer healthcare. It provides over-the-counter products comprising dietary supplements under the Centrum, Caltrate, and Emergen-C brands; pain management products under the Advil and ThermaCare brands; gastrointestinal products under the Nexium 24HR/Nexium Control and Preparation H brands; and respiratory and personal care products under the brand names of Robitussin, Advil Cold & Sinus, Advil Sinus Congestion Relief & Pain, Dimetapp, and ChapStick.
The GEP segment offers products that have lost marketing exclusivity in various markets; and branded generics, generic sterile injectable products, biosimilars, infusion systems, and other products.
The company serves wholesalers, retailers, hospitals, clinics, government agencies, pharmacies, and individual provider offices, as well as centers for disease control and prevention.
It has licensing agreements with Cellectis SA and AstraZeneca PLC; collaborative agreements with Eli Lilly & Company, OPKO Health, Inc., BioRap Technologies LTD., Merck KGaA, Transgene S.A., Edelris SAS, IGNITE Immunotherapy Inc., and AbCellera Biologics Inc.; and a research and development agreement with the National Cancer Institute.
The company has a partnership with The University of Pittsburgh. Pfizer Inc. was founded in 1849 and is headquartered in New York, New York.”
