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Pfizer or Eli Lilly: Which Company Has the Better Dividend Policy?

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Jan. 9 2019, Updated 7:30 a.m. ET

Dividend policy

On its third-quarter earnings conference call, Pfizer (PFE) reported the return of $15.0 billion in dividends by way of share repurchases as of the end of October 2018. The company plans to return $20 billion to shareholders in 2018.

On its third-quarter earnings conference call, Eli Lilly and Company (LLY) reported that it had returned $600 million in dividends and $1.0 billion in share repurchases in the first nine months of 2018. On December 19, 2018, the company issued a press release announcing a 15% hike in its quarterly dividend, which is payable on March 8, 2019. According to the release, the company’s quarterly dividend per share is $0.645, which translates into an annual dividend of $2.58 per share.

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Share repurchases

On its third-quarter earnings conference call, Pfizer estimated share repurchases totaling $12.0 billion for 2018. Of these, it completed $9.0 billion worth of share repurchases as of October 30, 2018. According to the company’s third-quarter earnings conference call, it had a $7.4 billion pending share repurchase authorization at the end of October 2018.

Dividend expectations

Wall Street analysts expect Pfizer’s dividends per share to be $1.37, $1.45, and $1.52, respectively, in 2018, 2019, and 2020. On the other hand, Eli Lilly is expected to report dividends per share of $2.29, $2.48, and $2.49, respectively, in 2018, 2019, and 2020. Eli Lilly is thus returning higher dividends per share than Pfizer to its shareholders.

The five-year average historical dividend yield for Pfizer is 3.44%, while it’s 2.77% for Eli Lilly. Pfizer’s dividend yield has remained higher than Eli Lilly’s, making it a better choice for income investors.

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