Key Takeaways:
- Pfizer’s dividend yield is currently sitting at 7.5%, making it one of the highest dividend-paying stocks among large-cap healthcare companies.
- The company is working through a post-COVID reset and shifting its focus toward new product launches and long-term pipeline growth.
- Analysts think the stock has 30% upside potential today, especially as earnings begin to recover and investor sentiment improves.
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Pfizer stock is down about 14% in the past year, and after playing a huge role during the pandemic, the company is now in rebuilding mode.
But even in this quieter phase, its dividend remains strong and the company’s product pipeline could surprise to the upside.
With shares still trading at a discount to analysts’ price target and a dividend yield above 7%, Pfizer might just be one of the best income opportunities investors are overlooking.
Why Has Pfizer’s Stock Dropped?
Pfizer’s stock has taken a hit over the last couple of years, largely due to fading demand for its COVID-related products. As vaccine and antiviral sales declined, investors started to re-evaluate what the company’s future looks like.
The company also made a major acquisition, which brought on some debt and raised a few concerns about timing, especially now that interest rates are higher. It was a bold move that put a bit of pressure on the company’s balance sheet in the short term.
But this feels more like a reset than a real problem. Management is focused on pushing new products to market and rebuilding the business for the long haul. The stock’s drop might be more about lowered market expectations than anything in the business being fundamentally broken.
Analysts Think The Stock Has 30% Upside Today
Despite all the recent challenges, a lot of analysts still see room for Pfizer to bounce back.
Some of the company’s latest product launches, like its RSV vaccine, are showing early signs of promise. And the recent acquisition of Seagen could be a big contributor to future growth, especially in oncology.
Pfizer’s stock is trading at one of its lowest valuations in years. The stock already has low expectations, so even a small improvement in sentiment could give the stock a solid boost.
1: Dividend Yield
Pfizer’s current dividend yield is around 7.5%. That’s not something you see every day from a company of this size.
The increase in the stock’s dividend yield is due to the company’s share price falling in the past few years.
For long-term investors who want steady income, this could be a rare shot at locking in a generous yield from a name-brand company with global reach and a long history of paying shareholders.
Find high-quality dividend stocks that are even better than Pfizer today. (It’s free) >>>
2: Dividend Safety
Pfizer is paying out a fairly large percentage of its earnings as dividends, but it should be sustainable.
For fiscal year 2024, the company had a 54% payout ratio, meaning it paid out 54% of normalized earnings as dividends. Free cash flow was lower than normalized earnings last year, but analysts expect these 2 metrics to be about the same over the next 3 years.
However, Pfizer still generates strong free cash flow, and management has made it clear they intend to maintain the dividend. The company also has a healthy balance sheet, a good credit profile, and access to capital if needed.
You can see analysts expect Pfizer’s earnings-per-share to stay roughly flat over the next 3 years, while dividends see small increases. Pfizer might have some problems maintaining its dividend, but that’s likely to be many years into the future.
See Pfizer’s full growth forecast. (It’s free) >>>
3: Dividend Growth Potential
Right now, Pfizer is expected to grow dividends in the low-single digits over the next 3 years. That’s pretty slow, but it’s by design.
The company is being cautious while it sorts out its earnings path and integrates recent acquisitions. Over the long term, it can be dangerous for dividends to grow faster than earnings, because that can lead to dividend payments exceeding earnings.
If Pfizer’s pipeline begins to deliver and revenue trends improve, we could see stronger earnings growth for Pfizer as well as dividend increases over time.
For now, investors should view Pfizer’s dividend payout as stable with upside further down the line.
TIKR Takeaway
Pfizer isn’t grabbing headlines these days and that could be an opportunity for investors.
With a top-tier dividend yield, and a safe dividend payout ratio, this healthcare heavyweight still has a lot to offer. Investors willing to look past the short-term noise may find value in one of the most overlooked dividend stocks on the market today.
The TIKR Terminal offers industry-leading financial data on over 100,000 stocks and was built for investors who think of buying stocks as buying a piece of a business.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
