Pfizer's 5.9% Yield vs. AbbVie's 53-Year Dividend Streak: Which Stock Is the Better Buy?

Pfizer and AbbVie are prominent pharmaceutical companies that appeal to income-seeking investors, yet they differ in their dividend yields and track records. Pfizer boasts a higher yield of 5.9%, but AbbVie's 2.5% yield is bolstered by a remarkable streak of 53 consecutive dividend increases, placing it among the Dividend Kings.

Despite Pfizer's appealing yield, its payout ratio of roughly 246% based on GAAP earnings raises concerns. A more reliable measure suggests a payout ratio of 89%, derived from free cash flow. Pfizer's management is confident in maintaining the dividend despite an upcoming patent cliff, attributing this assurance to cash flow, financial assets, and access to capital markets.

In contrast, AbbVie has a proven history of dividend growth, rising by 355% since its spin-off from Abbott Labs in 2013. While Pfizer may face challenges during the patent cliff, AbbVie has previously overcome such hurdles, with products like Skyrizi and Rinvoq maintaining revenue streams post-U.S. patent loss in 2023. AbbVie's diverse portfolio extends to neuroscience and cancer therapies, showcasing resilience and growth potential.

Ultimately, the better stock choice hinges on individual priorities: Pfizer for yield-focused income investors, and AbbVie for those seeking growth alongside consistent dividends.