Income investors on the hunt for high-quality dividend stocks should take a closer look at global pharmaceutical giant Pfizer Inc. (PFE). Pfizer is a very appealing stock for income investors. There are a number of reasons for this, including the company’s steady growth, durable competitive advantages, and high dividend yield.

With a 3.5% yield and annual dividend hikes, Pfizer is a top Dow Jones Industrial Average stock for dividend growth investors.

Business Overview & Recent Results

Pfizer Inc. is a global pharmaceutical company that focuses on prescription drugs and vaccines. Pfizer now reports in three business segments, which are Pfizer Biopharmaceuticals Group or Biopharma, Upjohn, and Consumer Healthcare. Biopharma includes the old Innovative Health businesses as well as the new Hospital business unit and contract manufacturing, Pfizer CentreOne. Top products include Eliquis, Ibrance, Prevnar 13, Enebrel (international), Chantix, Sutent, and Xeljanz. Upjohn sells off-patent branded and generic medicines including Lyrica, Lipitor, Norvasc, Viagra, and Celebrex. Consumer Healthcare is the over-the-counter business.

Pfizer generates annual revenue above $52 billion, and the stock has a market capitalization of $225 billion. Pfizer reported solid Q1 2019 earnings on April 30, 2019. Companywide revenues increased 2% while diluted earnings per share increased 9% to $0.68 in the first quarter.

From the perspective of each business segment, Biopharma increased revenue 7% to $9.2B on double-digit growth of Eliqus, Ibrance, Prevnar13 and Xlejanz. This was offset by declines in the Hospital business unit of 8% due to generic competition. Revenue at the Upjohn business segment increased 1% driven by growth in China and Japan but offset by lower volumes in the U.S. due to generic competition. Lastly, Consumer Healthcare revenues were down 2% due to 8% lower volumes in the U.S. but 4% growth in international markets.

Pfizer’s growth is the result of significant investments in its pipeline. Going forward, Pfizer sees the potential for approximately 25-30 significant product approvals through 2022, of which up to 15 have the potential to be blockbusters. It expects seven of the 15 to receive approval by 2020. Pfizer has a very strong oncology portfolio. The company has 9 products in Phase two of development and 12 in Phase three.

Attractive Dividend Profile

Pfizer is a well-known dividend stock, with a hefty yield of 3.5%. The company’s ability to pay a dividend is thanks to its steady profitability and consistent growth, the result of its competitive advantages. Pfizer is one of the largest pharmaceutical companies in the world. It invests heavily in research and development every year. This gives Pfizer the ability to bring new therapies to market or acquire entire companies outright.

Pfizer plans to invest $7.8 billion to $8.3 billion in R&D this year alone, a value few companies can match, to develop new drugs. This provides the company with the cash flow it uses to pay dividends to shareholders.

Pfizer currently pays an annual dividend of $1.44 per share, for a 3.5% yield. The company is expected to have a dividend payout ratio of approximately 73% in 2019, which means the dividend is sufficiently covered. As the company grows EPS in the years ahead, it should continue to raise its dividend. Therefore, Pfizer is a top Dow Jones Industrial Average stock for income investors.