Building a portfolio of high-yield dividend stocks can set you up for a lifetime of passive income. But investing in dividend stocks is much more complex than simply picking the stock with the highest yield. Finding an ultra-high-yield dividend stock trading at a fair price that has the potential to keep raising its dividend is the key to unlocking sustainable passive income.
Buying a handful of those stocks at a good value and holding them forever could create the cornerstone of a dividend portfolio. Here are three potential candidates to consider.
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1. Pfizer
Pfizer (NYSE: PFE) is one of the largest pharmaceutical companies in the world. The company’s share price soared in 2021 after the successful development and rollout of a COVID-19 vaccine. However, Pfizer’s COVID-19-related sales haven’t been able to keep up with expectations. As a result, the stock has fallen considerably from its late-2021 highs.
But that may be a great opportunity for investors.
After ramping up spending to support the development and sale of its COVID-19 vaccine and treatment, Paxlovid, management is unwinding that move and cutting costs aggressively. During its first-quarter update, management said it was on track to cut $4 billion in net costs by the end of the year. That should help push its operating margin back toward the mid-20% range.
Meanwhile, Pfizer’s broad portfolio of medications and treatments ensures that it produces strong enough revenue that it can reinvest in research and development (R&D) while producing substantial free cash flow. Its pipeline of drugs includes breast cancer drug atirmociclib, currently in phase 3 trials, and its oral weight loss drug danuglipron in phase 2b trials. A strong pipeline of patent-protected drugs ensures it can stand up to competition from generics as patents expire.
Despite the recent pressure on free cash flow amid the sales downturn, management reiterated its commitment to the company’s dividend during the first-quarter earnings call. “Our No. 1 priority from a capital allocation perspective is both supporting and…
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