Pfizer’s Total Shareholder Return Units (TSRUs) entitle you to a payment in Pfizer stock equal to the Total Shareholder Return (profits earned from holding a share of Pfizer stock including dividends) over a five-year period.
A hypothetical example: If, over the five-year period, the profit made from holding a Pfizer share and receiving the dividends is $20, each TSRU for that period will be worth $20, payable in the equivalent number of shares of Pfizer stock.
What Decisions Do I Need to Make?
1. Will you continue to work at Pfizer through February 25, 2019? If you do, your TSRUs will vest and will automatically pay out in Pfizer stock on February 25, 2021. If you do not, your TSRUs will not vest and will be forfeited.
2. Assuming your TSRUs vest, what will you do with the shares of Pfizer you receive in 2021? You can sell them, hold them, or sell some of them.
What Should I Do with my Pfizer Stock?
Three Things to Consider
1. Risk Reduction – It is generally accepted that you can achieve significant risk reduction by selling an individual company’s stock and diversifying. This is the investing application of “Don’t put all your eggs in one basket.”
2. Tax Implications – Capital gains taxes due on the sale of your Pfizer shares will be affected by how long you hold those shares. However, the importance of timing the sale of your shares often is outweighed by the risk reduction achieved through selling and diversifying at the earliest opportunity.
3. Big Picture – No financial decision should be made in a vacuum. When making an important financial decision, I recommend having a holistic financial plan that considers your other assets, your goals, and your appetite for risk, among other factors.