Summary
- The Upjohn merger with Mylan has caused some uncertainty around Pfizer shares.
- However, I believe the dividend will likely by maintained.
- In this article, I explain why Pfizer is a good defensive stock to own for the next recession.
- Written by Robert Kovacs
Introduction
Pfizer (PFE) is a stock you should own for the next recession. The announcement of the Upjohn and Mylan (MYL) merger creates a good opportunity to initiate a position.
We recently wrote an article on how to spot a recession-proof stock. In it we pointed out that for your portfolio to have the best chances throughout a recession, it needs to be skewed towards conservative sectors (such as healthcare, utilities and staples) and towards large, financially strong companies.
However, preparing your portfolio for a recession comes with a caveat: some stocks will not have great performance throughout the late stages of the business cycle. Unfortunately, we have misplaced our crystal ball, and it is impossible for us to tell you exactly when a recession will occur.
Investors can reduce the impact of this by picking sectors that do well in the late stages of the bull market (utilites and staples). They can also make the decision of foregoing capital gains to pick a stock which will hold up better in a recession.
As dividend investors, our goal is to maximize our dividend income. Capital gains are nice, because they allow us to increase our dividend income if we’re proactive. We explain this further here.
But avoiding capital losses in a down market is nice as well. If in a bull market, you’re seeking to make more money than others, and in a bear market you’re trying to lose less. We believe now is a good time to transition towards a more recession-proof portfolio. The beauty of it is that you will continue receiving growing dividends, which you can reinvest. Doing this won’t detract you from your goals of retiring off dividends.
