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If you’re building a retirement portfolio, you’re likely focused on two things: stability and income. While traditional bonds offer stability, their current yields can be disappointing.

Projected rate cuts make it even more difficult for those of us searching for yield.

CNBC personality Jim Cramer recently offered a solution.

The bombastic—and sometimes controversial—financial commentator dubbed pharmaceutical giant Pfizer (PFE) a “bond proxy” presenting a compelling perspective for retirees. But what does that mean for your long-term income plan?

Bond Proxy Defined

A bond proxy is a stock that behaves more like a fixed-income investment (a bond) than a typical growth stock. Investors buy it primarily for its high, reliable cash payouts (dividends) rather than for rapid share price appreciation.

For Pfizer, the case is clear:

1. High-Yield “Coupon”: Pfizer’s dividend yield currently hovers around the high 6% to 7% range. This substantial cash return acts like a high coupon payment from a bond.
2. Stagnant Price: Cramer highlights that the stock price has often gone sideways. The primary return you receive is the dividend, making it less of a growth investment and more of a predictable income stream.
3. Dividend Safety: Crucially, Pfizer’s massive free cash flow generally provides a strong safety net, indicating the company can sustain this high payout, a key trait for any retirement income asset.

Pfizer’s place in your portfolio

Cramer acknowledges the genuine challenges Pfizer faces, primarily patent expirations. These risks are why the stock trades at a low valuation and why its price is stagnant.

For a retirement investor, this is the trade-off:

• Pro: You get a high, reliable yield today that easily outpaces many bond funds and offers better potential for dividend growth over time.
• Con: You must accept little to no capital appreciation in the near term and the inherent risks of a major pharmaceutical company navigating a change in its drug pipeline.

For the more adventurous among us, selling call options against the position would further enhance the already generous yield.

As of this writing the bench mark Ten-Year Treasury is returning 4.16%

Pfizer (PFE) is trading at $25.93 annual dividend $1.72 or 6.67%

I am not a financial advisor. This story is written for informational and entertainment purposes. Do your own due diligence.

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