Is It Time to Invest in Pfizer? Exploring its 7% Dividend Yield and Growth Potential
Pfizer (NYSE:PFE) stock is a biopharmaceutical firm that had a magnificent breakout in 2021 as the worst of the pandemic sent COVID vaccine demand through the roof. Since that peak, it’s been a painful descent for shares of PFE, with the name now down around 60% from its all-time high. Catching the name on the […] The post Is It Time to Invest in Pfizer? Exploring its 7% Dividend Yield and Growth Potential appeared first on 24/7 Wall St..
Pfizer (NYSE:PFE) stock is a biopharmaceutical firm that had a magnificent breakout in 2021 as the worst of the pandemic sent COVID vaccine demand through the roof. Since that peak, it’s been a painful descent for shares of PFE, with the name now down around 60% from its all-time high. Catching the name on the way down has proven incredibly difficult, and while there are a few interesting drug candidates in the pipeline, the firm may have limited options before its big fall off the patent cliff.
Undoubtedly, organic innovation seems to be key to offsetting such sales-eroding pains as many of its drugs face off with generic competition. But as is the case with many pharmaceutical firms, it’s really tough to tell what will emerge as the next big money maker. In any case, I’d pay close attention, not to M&A, but R&D, as Pfizer aims to punch its ticket to some pretty promising growth areas of the pharma space. Perhaps most notable among them, I believe, lies in the GLP-1 and cancer drug scenes.
For now, Pfizer stock is a falling knife that demands investor patience. The stock may have enjoyed a bounce of more than 10% off multi-year lows, but before investors get excited about a comeback, I do think it’s worth evaluating the risk and the safety and sustainability of the now-7.2%-yielding dividend juggernaut. Undoubtedly, Pfizer’s a well-established firm that’s been a blue chip for so long. With a $135 billion market cap, Pfizer is still a dominant player, but like with most hefty firms, it’s tough to turn the tide, especially in the face of various company- and industry-specific headwinds.
In any case, a question on the minds of many interested investors has to be whether or not that dividend is secure.
Key Points
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Pfizer stock is a deep-value kind of blue chip with a yield of more than 7%.
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The dividend looks safe — for now. The real question is whether there’s enough growth and innovation in the pipeline as the patent cliff arrives.
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Just because the dividend is safe doesn’t mean PFE stock is a strong buy. In fact, most analysts are cautious on the name.
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Is Pfizer’s hefty 7% dividend yield safe?
Undoubtedly, the name has encountered its fair share of pressures of late. And while the dividend is getting quite stretched, it’s not necessarily at risk of an imminent cut, especially if Pfizer can mitigate the damages of falling off that patent cliff. The company is generating a good amount of free cash flow, but almost all of it is going towards that colossal dividend payment.
While the dividend could survive, I do think it’d be better to use the capital to fund R&D projects to accelerate a sales growth turnaround. In any case, I view Pfizer’s dividend as relatively safe, but acknowledge that the stakes get a bit higher every year that goes by without relief. Who knows? Perhaps all it takes is one big breakthrough (like the COVID vaccine amid the pandemic) to turn Pfizer’s fortunes around.
Can Pfizer get back on the higher-growth track?
Undoubtedly, a lot of big change needs to happen before investors start backing up the truck on the name again. In the first quarter, a hedge fund and activist named Starboard Value cut its stake in Pfizer by around half. The rapid-fire acquisition spree has been quite costly. And it doesn’t seem to be the best way to steer clear of the patent cliff.
Though only time will tell if Pfizer can become a better allocator of capital, I do think that the recent stake reduction warrants the attention of investors. Perhaps there’s less value in the name than various metrics suggest (8.18 times forward price-to-earnings), especially if cost-cutting efforts cut too deep into the innovative pipeline. In any case, I think Pfizer is a giant question mark right now, one that I’m in no rush to buy, even if the 7.2% yield is destined to survive for the long run.
For now, Pfizer’s GLP-1 setback remains a bit concerning, especially as market leaders continue doing most of the heavy lifting. The cancer drug pipeline, I believe, is the big wildcard that could help Pfizer stage a comeback for the ages. Will it come soon enough to add further support to the dividend? Time will tell.
The post Is It Time to Invest in Pfizer? Exploring its 7% Dividend Yield and Growth Potential appeared first on 24/7 Wall St..
