Billionaire Ken Griffin loaded up on this high-yielding dividend stock. Should I?

Dividend stocks aren’t just for income investors. Do you want proof? Just look at Ken Griffin’s purchases for his hedge fund Citadel in the second quarter of 2024.

Griffin’s net worth is $43 billion. It’s fair to say he doesn’t need dividend income and is by no means an income investor. However, the billionaire loaded up with at least one high-yielding dividend in Q2.

A big buy from a big pharma

Griffin went on a major shopping spree in Q2. He increased Citadel’s holdings by 20% or more for 35 of the hedge fund’s top 50 holdings.

Most of these purchases were not high-yielding dividend stocks. However, one notable exception was Griffin’s large purchase of a large pharmacy — Pfizer (PFE -0.93%). The drugmaker’s forward dividend yield is 5.8%.

In Q2, Griffin bought an additional 7.89 million shares of Pfizer. This increased Citadel’s stake by 63%. Pfizer now ranks as the 14th largest hedge fund and 12th largest stock holding (the two top holdings are exchange-traded funds, or ETFs).

Griffin has a long history with Pfizer. He first initiated a position in the pharma stock in Q2 of 2013. Over the years, the billionaire hedge fund manager has increased and decreased Citadel’s stake in Pfizer. Recently, however, he seems to be all on board with the big drug maker. Griffin has increased its position in Pfizer for six consecutive quarters.

Why does Griffin like Pfizer?

As far as I know, Griffin has not publicly commented on why he aggressively added to Citadel’s position in Pfizer. However, we can make some educated guesses.

I’m sure he likes the company’s juicy dividend. Griffin is certainly not an income investor. But he certainly admits that a dividend yield of nearly 6% gives Pfizer a good head start on delivering market-beating total returns.

Valuation could be another top consideration for the billionaire investor. Pfizer’s stock price remains about 50% below its peak set at the end of 2021. The stock’s forward price-to-earnings ratio is 10.3, much lower than S&P 500 healthcare forward earnings multiple of 19.6.

Griffin is big on diversification. The Citadel portfolio includes 5,816 holdings. The addition of the position in Pfizer may have been in part to increase the hedge fund’s exposure to healthcare and, in particular, the pharmaceutical industry.

Ultimately, however, Griffin invests in certain stocks because he believes they will make money. I guess he likes Pfizer’s long-term growth prospects. Griffin is savvy enough to understand the challenges facing the drugmaker, including declining sales of its COVID-19 products and a looming patent cliff with several top-selling drugs losing patent exclusivity. However, he also knows the efforts Pfizer has made to overcome these challenges, such as investing heavily in research and development and making acquisitions to strengthen its pipeline.

Should you buy Pfizer stock too?

No one should buy or sell a particular stock just to follow in the footsteps of a famously wealthy investor like Ken Griffin. However, the trades of successful investors can often provide good ideas to consider. Should you buy Pfizer stock too?

Growth investors probably won’t find Pfizer super attractive. While I think big pharma will deliver solid growth over the next few years, it probably won’t be enough to keep up with many tech stocks and other high-growth alternatives.

Highly risk-averse investors may want to stay on the sidelines with Pfizer as well. The drugmaker’s drug candidates could fail in clinical trials and cause stock to decline. This is less of an issue with a large company like Pfizer, which has a deep pipeline, but it’s certainly something to keep in mind.

On the other hand, Pfizer could be a good fit for value investors. As mentioned before, the stock is relatively cheap. If the company’s new products and late-stage pipeline programs live up to their potential, Pfizer’s stock price could rebound well over the rest of the decade.

And there’s one group of investors who should absolutely love Pfizer — income investors. Pfizer’s performance is exceptional. The company appears to be in a strong position to keep the dividend flowing. No, dividend stocks aren’t just for income investors. But a high-yielding dividend stock with a long track record of success, such as Pfizer, will typically be better suited for income investors than any other type of investor.