Smart Dividend Portfolio Edition #61: Pet Power
1
Dear Investor,
Welcome to the 61st edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
1
1
Market-Moving News: May 19, 2025
Stocks clocked in strong weekly gains, erasing their 2025 losses and turning positive year-to-date. The Dow Jones Industrial Average (DJIA) rose by 3.41%, the S&P 500 (SPX) jumped by 5.27%, and the tech-heavy Nasdaq-100 (NDX) surged by 6.81% for the week.
The week opened with a bang as the U.S. and China announced a 90-day truce in the trade war. The rebound in risk appetite depressed stocks perceived as defensive and drove investors back to riskier bets – propelling the Nasdaq-100 into a bull market just a little over a month after it fell into the grip of a bear. The large-cap tech benchmark and the S&P 500 then proceeded to gain every day of the week, while the Dow saw losses midweek, driven down by a sharp drop in UnitedHealth.
The weaker-than-expected readings on CPI and wholesale inflation deflected doubts about Corporate America’s ability to withstand trade turbulence without having to pass on higher costs to consumers. Arriving right after a strong earnings season, this data confirmed U.S. companies’ resilience, supporting forward valuations based on high profit expectations and adding optimism about the overall economic outlook. On this background, a fifth-straight monthly dip in the consumer sentiment index and weaker-than-expected retail sales went almost unnoticed.
In fact, Trump’s Middle East news flurry could easily overshadow any negative news. The President announced a $142 billion arms deal with Saudi Arabia, as well as broader investments totaling $600 billion – and then went on to strike major aviation and defense agreements with Qatar, followed by a deal-heavy visit to the United Arab Emirates (UAE). Qatar signed more than $243 billion in defense and commercial deals with the U.S., laying the groundwork for a bigger $1.2 trillion economic pledge.
However, the strongest catalyst for the U.S. stock rally was the technology component of these Middle East agreements. Thus, Nvidia and AMD will supply advanced chips to Saudi Arabian state-backed firm Humain for a massive data-center project, while other U.S. hardware and infrastructure firms also stand to benefit from the Kingdom’s bid to become a global tech hub. In a separate development, President Trump finalized a significant AI chip agreement with the UAE, permitting the Gulf country to import advanced Nvidia chips for the construction of the largest AI data center outside of the U.S. in Abu Dhabi. Risk-on sentiment was so strong that the news of Moody’s downgrade of the U.S. credit rating on Friday – even coupled with the failure to advance House Republicans’ massive tax-and-spending bill – provided just a minor hiccup in the stock-market advance. The rally was further supported by news that the U.S. and the EU broke a prolonged deadlock and agreed to resume formal trade negotiations, which gave the market another signal that the “tariff tantrum” in stocks may be over.
1
1
1
This Week’s Quality Dividend Stock Idea
Zoetis (ZTS) is a global animal health company that specializes in the discovery, development, and commercialization of veterinary medicines, vaccines, and diagnostic products. Its portfolio supports the health of livestock and companion animals, with operations spanning the globe. Zoetis is the world’s leading animal health company, driven by therapeutics and preventive care innovation.
1
Livestock Legacy
Zoetis, a global leader in animal health, traces its origins to 1952 as a division of Pfizer, initially operating as Pfizer Animal Health. The unit developed a range of innovative veterinary products, including parasiticides and anti-infectives, building a strong foundation in animal healthcare. However, a transformative milestone came in 2013 when Pfizer spun off Zoetis as an independent, publicly traded company, listing it on the New York Stock Exchange under the ticker “ZTS.” This move granted Zoetis the strategic agility to sharpen its focus on animal health, expand globally, and diversify its product portfolio.
As an independent entity, Zoetis capitalized on the growing demand for companion animal care, which now accounts for a majority of its revenue. This segment has been a key growth driver, fueled by blockbuster drugs such as Librela, a monoclonal antibody for osteoarthritis pain, and Simparica, a leading parasiticide, reflecting strong demand for premium pet healthcare.
Zoetis’s growth has been fueled by a series of high-impact acquisitions that strengthened its leadership in biologics, diagnostics, and global operations. In 2023, the company acquired PetMedix, a U.K.-based biotech developing species-specific antibody therapies, reinforcing Zoetis’s dominant position in monoclonal antibody innovation. This followed its 2022 acquisition of Basepaws, a pioneer in pet genetics and early disease detection, enabling a strategic expansion into precision veterinary care. That same year, Zoetis also acquired Jurox, an Australian veterinary pharmaceutical company, gaining a robust portfolio of anesthetics and bolstering its manufacturing and commercial footprint in the Asia-Pacific region. These and other targeted acquisitions have not only diversified Zoetis’s product pipeline and technology base but also extended its global reach — further solidifying its status as the world’s leading animal health company.
Innovation remains a cornerstone of Zoetis’s strategy, with recent R&D investments yielding approvals for products like Valcor in Brazil, an endectocide for cattle, and Protivity in the U.K., the first modified-live vaccine for Mycoplasma bovis in cattle. Zoetis also made significant strides in monoclonal antibody therapies, with Librela for dogs and Solensia for cats — both pioneering treatments for osteoarthritis pain targeting nerve growth factor (NGF), and now approved in the U.S., EU, and multiple global markets. In the parasiticide segment, Simparica Trio received a new U.S. label in 2025 as the first and only canine combination treatment approved to prevent flea tapeworm infections, while Revolution Plus and Simparica Chewables expanded their tick protection claims to include the invasive Asian longhorned tick. Zoetis also secured a conditional USDA license in 2025 for its H5N2 avian influenza vaccine, addressing a critical threat to poultry health. Looking ahead, the company is leveraging generative AI in drug discovery to accelerate its pipeline and strengthen its capabilities across protein sciences and biology.
Today, Zoetis has annual revenues of $9.3 billion and a market capitalization of around $73 billion.
1
Pet Protection
Zoetis stands as a global leader in animal health, generating revenue through the development, manufacturing, and commercialization of veterinary medicines, vaccines, and diagnostics for both livestock and companion animals. The company operates through two primary segments – U.S. and International, while its Client Supply Services (CSS) unit, which provides contract manufacturing and human health products, accounts for about 1% of total revenues.
The company’s core product portfolio spans multiple therapeutic areas, including parasiticides, vaccines, dermatology treatments, anti-infectives, pain and sedation products, and animal health diagnostics. Parasiticides like Simparica protect animals against fleas, ticks, lice, and worms, while dermatology offerings, such as Apoquel and Cytopoint, address allergic conditions. In 2024, the company’s top 10 products, including Simparica, Apoquel, Cytopoint, Librela, and the ceftiofur line, accounted for around 55% of total revenue.
Geographically, Zoetis’s reach spans over 100 countries, with revenue distribution of approximately 55% from the U.S. and 45% from international markets, reducing its exposure to localized economic slowdowns or geopolitical risks. Its global manufacturing footprint includes 22 manufacturing sites across 11 countries, enhancing supply chain flexibility and resilience.
Zoetis has diversified its sales channels, tapping veterinary clinics, retail outlets, and home delivery platforms, including a growing digital presence. Alternative channels like retail and home delivery, which now account for 21% of its U.S. pet care portfolio, have grown rapidly, reducing reliance on traditional distribution methods and enhancing customer access.
1
Furry Fortitude
Zoetis remains a leader in the resilient animal health industry, supported by long-term trends like rising global demand for animal protein and increasing pet ownership. In 2024, the company increased its R&D spending by nearly 12% to $686 million, representing about 7% of annual revenue, reflecting its commitment to innovation.
Recent milestones include FDA approval for a new label indication of Simparica Trio, making it the first canine parasiticide to prevent flea tapeworm infections by killing fleas before transmission. Zoetis also secured conditional U.S. Department of Agriculture (USDA) approval for an avian influenza (aka bird flu) vaccine, targeting a critical area of global poultry health.
ZTS is also betting on the $2–$3 billion market for canine osteoarthritis (OA) pain management, particularly with Librela. Since its U.S. launch in October 2023, over one million dogs have been treated with the drug. With an estimated 27 million dogs in the U.S. with OA and 20 million animals with dermatological conditions still untreated or undertreated, Zoetis is investing in medical education and marketing to raise awareness. It is also developing a next-generation, long-acting OA antibody expected to gain approval in 2025, targeting a unique binding site for better efficacy.
The animal health company expects a $20 million impact on net income in FY25 from tariffs on Chinese-sourced active pharmaceutical ingredients (APIs) for livestock products and diagnostics. To mitigate this impact, the company is leveraging its U.S.-based manufacturing, global supply chain, and flexible sourcing strategies, with potential long-term adjustments to further reduce tariff exposure. ZTS also continues to engage U.S. policymakers on Section 232 tariffs, arguing that animal health products, with the majority of their manufacturing and R&D in the U.S., do not pose a national security risk, though the outcome remains uncertain. Section 232 tariffs, authorized by the Trade Expansion Act of 1962, allow the U.S. President to adjust imports that threaten national security, using measures like tariffs or quotas.
The company maintains a competitive edge in parasiticides and dermatology, benefiting from first-mover advantages and strong customer loyalty. Simparica Trio, its triple-combination flea, tick, and heartworm treatment, captured 40% of the U.S. puppy market, supported by high adoption rates. In dermatology, products like Apoquel and Cytopoint boast over 90% veterinarian satisfaction, reinforcing brand loyalty. Despite Merck’s potential entry into the dermatology market, Zoetis sees long-term growth, with 20 million dogs still untreated for allergic dermatitis.
1
Risk Resilience
Despite these gains, HIG faces ongoing challenges from social inflation, driven by rising litigation costs, larger jury awards, and expanding liability interpretations – factors that continue to pressure the insurance industry. These trends have pushed up loss costs, particularly in casualty lines like general liability. To stay ahead, HIG has incorporated low double-digit loss cost inflation into its 2025 pricing models. In Q1 2025, general liability pricing rose 10.5%, while business insurance (excluding workers’ compensation) saw a 9.9% increase in renewal written pricing, comfortably outpacing inflationary pressures.
However, social inflation remains a persistent risk, and HIG is addressing this through disciplined underwriting, data-driven pricing, and investments in AI to better predict the cost of claims. This approach, combined with a diversified product mix, positions HIG to manage the impact of social inflation while maintaining strong underwriting profitability.
Additionally, tariffs pose further challenges. Tariffs could increase repair costs for commercial auto and property claims, potentially squeezing margins. HIG is actively responding to these cost pressures in 55% of its personal lines markets, where file-and-use pricing allows near-immediate rate adjustments after regulatory filing – avoiding the delays of prior-approval states. File-and-use pricing, used in certain U.S. jurisdictions, enables insurers like HIG to implement new rates immediately upon filing with the state insurance department, without waiting for pre-approval.
1
Paw Profit
Zoetis has delivered consistent financial growth over the past five years, with revenue and adjusted diluted EPS growing at a CAGR of 7.9% and 10.8%, respectively. This steady performance reflects its innovation-driven portfolio, strategic acquisitions, and operational efficiency, enabling the company to navigate macroeconomic challenges while capitalizing on rising global demand for animal health solutions.
In Q1 FY25, Zoetis reported revenue of $2.2 billion, up 9% on an organic operational basis, excluding foreign exchange and the medicated feed additive divestiture—surpassing market estimates. This growth was fueled by a balanced 4% price increase and 5% volume expansion. Adjusted EPS came in at $1.48, representing 8% operational growth, boosted by share repurchases that reduced the share count, also beating analysts’ expectations.
The U.S. segment, which accounts for 55% of Zoetis’s total revenue, posted $1.2 billion in sales, up 2% year-over-year and 6% on an organic operational basis. Meanwhile, the international segment generated $1 billion in revenue, up 11% organically. Companion animal product sales rose 9% operationally, driven by strong demand for Simparica, key dermatology products like Apoquel and Cytopoint, and monoclonal antibodies (mAbs) for osteoarthritis pain relief. The livestock segment, which contributes 29% of total revenue, grew by 7% operationally to $645 million, supported by increased demand in poultry and cattle.
Despite higher manufacturing costs, Zoetis improved its adjusted gross margin to 72.1%, up 140 basis points, reflecting disciplined cost management. For FY25, Zoetis projects revenue of $9.51 billion at the midpoint, with organic operational growth of 6% to 8% and adjusted earnings of $6.30 per share. Despite tariff headwinds, Zoetis raised its full-year 2025 EPS guidance, benefiting from favorable currency movements and robust segment performance, underscoring confidence in its diversified, resilient business model.
Zoetis maintains a debt-to-equity ratio of 1.45, higher than the sector median, reflecting a deliberate strategy to use leverage for enhancing shareholder returns. This approach is supported by the company’s strong cash flows and earnings, allowing it to effectively manage its financial obligations. Zoetis also holds an investment-grade credit rating of “BBB+” from S&P, indicating a stable outlook and confidence in its financial health.
1
Solid Financials
Zoetis remains committed to delivering shareholder value through consistent dividend growth and strategic share repurchases. The company has raised its dividend for 13 consecutive years, reflecting a disciplined approach to capital returns. Over the past decade, Zoetis has increased its dividend at a CAGR of approximately 20%, establishing itself as a reliable dividend payer.
In Q1 2025, Zoetis paid a quarterly dividend of $0.50 per share, or $2.00 annually, translating to a dividend yield of 1.2%, slightly below the healthcare sector average. Despite this modest yield, Zoetis maintains a conservative payout ratio of around 31%, allowing for significant earnings retention to support future growth.
The company’s impressive ROE of 51%, among the top 5% in the healthcare sector, and nearly 25% free cash flow margin, ranked in the top 10% of the industry, further highlight its strong financial foundation, supporting the expected growth of shareholder compensation.
Zoetis actively manages its share count through a disciplined buyback program, which has bolstered its EPS. In Q1 2025, share repurchases reduced the outstanding share count, boosting adjusted diluted EPS by 2%. This approach underscores the company’s confidence in its long-term growth potential and capital efficiency. In August 2024, Zoetis’s Board of Directors authorized a multi-year share repurchase program of up to $6 billion. As of March 31, 2025, $5.2 billion remained under this authorization, providing significant flexibility for further buybacks.
Despite these strengths, Zoetis shares have declined by 5% over the past year, as its FY25 guidance fell short of analyst expectations due to slowing growth and softer performance in some business segments. ZTS stock currently trades at a price-to-earnings ratio of 27x, above the healthcare sector average, reflecting its premium valuation. However, it remains attractively priced, trading at a discount of about 25% to its five-year average P/E ratio, suggesting potential for multiple expansion.
Wall Street analysts remain bullish, projecting an upside of 16.5% over the next 12 months, with some analysts suggesting up to 31% upside. Furthermore, discounted cash flow models suggest that ZTS stock is undervalued by around 30%, signaling further upside.
1
Investing Takeaway
Zoetis presents a compelling dividend growth story for long-term investors. Despite a modest dividend yield, the company’s impressive track record of consecutive annual dividend increases reflects strong financial discipline and earnings growth. Its low payout ratio leaves ample room for future hikes, supported by robust cash flows and high returns on equity. Zoetis’s focus on high-margin companion animal products, strategic acquisitions, and ongoing innovation in veterinary care further strengthens its cash generation potential. Additionally, a disciplined share buyback program enhances per-share earnings, reinforcing shareholder returns. While its premium valuation may pose short-term volatility, Zoetis’s solid fundamentals and dominant market position in animal health make it an attractive choice for income-focused investors seeking reliable dividend growth.
1
Dividend Investor Portfolio
1
Portfolio News
▣ EOG Resources (EOG) has secured a 100% stake in the exploration rights for “Unconventional Onshore Block 3” (also known as UCO3), a 3,609 square kilometer (900,000-acre) area in Abu Dhabi’s Al Dhafra region. The concession, awarded by Abu Dhabi’s Supreme Council for Financial and Economic Affairs, covers an over-pressured, oil-prone basin ideal for unconventional oil extraction, like shale, which requires advanced techniques such as horizontal drilling and hydraulic fracturing. As the operator, EOG will manage all exploration activities over the next three years, including drilling and data collection to assess commercial viability. If successful, the company can transition to a production concession, with the Abu Dhabi National Oil Company (ADNOC) having the option to join as a partner. Drilling is set to begin in the second half of this year, and EOG has clarified that this project will not alter its 2025 capital spending plan.
▣ In a move that could benefit banks like JPMorgan Chase (JPM), U.S. regulators are reportedly preparing the largest cuts to bank capital requirements in over a decade, according to the Financial Times. Citing sources familiar with the matter, the report suggests that a reduction in the supplementary leverage ratio (SLR) could be announced within the next few months. The SLR, which mandates that large banks hold an extra buffer of loss-absorbing capital, may be adjusted to reduce the capital set aside for safer assets, like U.S. Treasuries. This move could free up capital for more lending and market activities, potentially encouraging banks to take on a greater role in Treasury market intermediation. Regulators have signaled a willingness to revisit the SLR framework, particularly following recent volatility in Treasury markets.
1.
Recent Trades
We are removing Allianz from our Dividend Portfolio as we see more compelling U.S. alternatives that offer stronger shareholder returns in the current uncertain macro environment. While Allianz has a solid history of dividend payouts, its exposure to Europe’s challenging economic landscape and potential pressure due to exposure to less liquid assets like property, private debt, and private equity pose significant risks. Given these concerns, we believe reallocating to a more resilient dividend stock with stronger near-term potential is a prudent choice.
We are happy to announce the addition of Verizon to our Portfolio. We had recommended Verizon in our previous edition of the Dividend Newsletter on May 5. Verizon is one of the largest U.S. wireless carriers, offering a broad range of services, including 5G, fiber-optic internet, and enterprise solutions. The company stands out as a reliable income play for dividend-focused investors, with nearly two decades of uninterrupted dividend growth and a yield that significantly exceeds the telecom sector average. Its consistent cash flows, conservative payout ratio, and expanding 5G and broadband footprint support its ongoing dividend stability.
With a defensive business model and an attractive valuation, Verizon offers a compelling option for those seeking steady returns and moderate capital appreciation, particularly in uncertain market environments.
1
1
Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 3.92% | +5.78% | $5,933.74 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Jun 12, 2025 | Jul 01, 2025 | 2.46% | $6.16 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Jun 09, 2025 | Jun 26, 2025 | 2.61% | $20.84 |
| Bank of Nova Scotia (BNS) | Jul 03, 2025 | Jul 29, 2025 | 5.98% | $2.97 |
| EOG Resources (EOG) | Jul 17, 2025 | Jul 31, 2025 | 3.05% | $3.90 |
| ExxonMobil (XOM) | May 15, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
| IBM (IBM) | Aug 11, 2025 | Sep 10, 2025 | 3.14% | $6.72 |
| JPMorgan Chase (JPM) | Jul 08, 2025 | Jul 31, 2025 | 3.2% | $5.60 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Jun 03, 2025 | Jun 10, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Jun 09, 2025 | Jun 26, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Jun 23, 2025 | Jul 17, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | May 29, 2025 | Jun 26, 2025 | 2.36% | $3.56 |
| VICI Properties (VICI) | Jun 18, 2025 | Jul 03, 2025 | 5.22% | $1.73 |
| Verizon (VZ) | Jul 10, 2025 | Aug 05, 2025 | 6.09% | $2.71 |
NameEX-Dividend DatePayment DateYield on Cost Annual DPS
1
1
1
Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
1
Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
