BioNTech (BNTX 0.29%) just might be the most underappreciated biotech on the planet. The German company initially developed the COVID-19 vaccine that caught Pfizer's (PFE 0.91%) attention. Many people now refer to that vaccine as "the Pfizer vaccine," completely leaving BioNTech out.

However, BioNTech has profited just as much as Pfizer has from the success of their COVID-19 vaccine. In the first quarter, the company recorded sales of 2.05 billion euros, with more than half of that amount flowing to its bottom line.

The big bucks are only beginning to flow in for BioNTech. Wall Street analysts project the company could rake in close to $15 billion this year. BioNTech will be flush with cash that it could use in lots of different ways. But is the biotech about to make a big blunder with one alternative that it's considering?

Person in white lab coat with hand on forehead and open mouth.

Image source: Getty Images.

Following in Pfizer's footsteps?

Pfizer has been a longtime favorite for income-seeking investors with its juicy dividend yield. Now, it looks like BioNTech could follow in the footsteps of its big partner.

BioNTech CEO Uğur Şahin said in the company's annual shareholder meeting last week that the company's primary focus for this year will be to reinvest the money generated from its COVID-19 vaccine. Şahin stated that BioNTech will fund innovation across multiple programs.

However, BioNTech CFO Sierk Poetting had some surprising news at the shareholder meeting. He said that the management board and supervisory board will evaluate the possibility of proposing next year that BioNTech initiate a dividend. 

Poetting didn't make a firm commitment to a dividend. He did say, though, that the company would look at "whether and in what amount a resolution on the distribution of dividends should be proposed to the Annual General Meeting" to be held in 2022.

Why a dividend could be a big mistake

Investors usually love for a company to initiate a dividend program. However, taking that step could be a big mistake for BioNTech.

Very few biotechs offer dividends. Of course, most of them don't have enough cash flow to even consider a dividend program. Many biotechs that are highly profitable, though, still don't pay a dividend because they think investing in growth will provide a better return for shareholders.

BioNTech's shareholders would almost certainly be better off over the long term from the company using its newfound wealth to expand its pipeline instead of paying dividends. The biotech doesn't have any programs in phase 3 testing other than its COVID-19 vaccine, although Şahin noted in his comments last week that "three potentially registrational Phase 2 trials are expected to start this year."

A quarterly dividend program (as opposed to a one-time dividend payout) could be especially problematic for BioNTech. No one knows for sure yet how long the immunity provided by COVID-19 vaccines will last. It's quite possible that the hefty revenue stream that BioNTech will enjoy in 2021 and 2022 won't be sustainable.

A prediction

BioNTech could be on the verge of making a big blunder. However, I predict that the company won't recommend the initiation of a dividend program to shareholders next year.

Poetting prefaced his comments about BioNTech evaluating a proposal about paying a dividend by noting that it was "a topic that was frequently subject to questions in advance of this Annual General Meeting." I suspect that he wouldn't have mentioned dividends at all were it not for the number of shareholder questions on the subject. 

My hunch is that BioNTech's management team knows that initiating a dividend program wouldn't be a smart move. They understand the risk that the sales for the COVID-19 vaccine could be lower in the future than they are now. BioNTech's executives also probably would prefer to invest more heavily in research and business development than in paying a dividend.

However, management also doesn't want to give the impression that they're sweeping the subject of dividends under the rug. Poetting's commitment to consideration of a dividend proposal next year essentially punts the issue into the future without providing any assurances that a dividend will be forthcoming.

If coronavirus variants result in the need for frequent booster doses of vaccines and BioNTech's pipeline candidates are successful, maybe the company will be able to pay a dividend sometime down the road. But will BioNTech initiate a dividend next year? I seriously doubt that the biotech will make that mistake.