Like any company, Pfizer (PFE -0.12%) faces some risks that could give investors pause. Patents for several of the company's drugs begin to expire after 2025. There's uncertainty about recurring revenue for Pfizer's COVID-19 vaccine after the pandemic ends.
But there are also factors that make Pfizer attractive despite those risks. In this Motley Fool Live video recorded on Aug. 4, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss why investors should consider buying Pfizer stock right now.
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Keith Speights: On Monday we also had a question about whether or not Pfizer is a stock to put new cash in right now. We just discussed the reasons why not to buy Pfizer or maybe think about not buying Pfizer. Brian, what are some reasons why an investor should consider buying Pfizer stock?
Brian Orelli: Let me give you three here. First one will be the valuation. While shares have been cheaper on a price-to-sales multiple at times in the past, they've also been a lot more expensive. Certainly pre-pandemic. There's certainly room which maybe trading in the middle of the valuation range if you look at something like price to sales.
I think if they can make up for any losses of COVID-19 sales from other drugs. I think they are in fine shape valuation-wise. It certainly could be cheaper, but it has been a lot more expensive in the past.
We just talked about the dividend and I think that's another reason to be buying the stock right now. The dividend yield is 3.6%. That's basically 3.6% that you don't have to get from price appreciation of the underlying shares to get a return. I think the dividend will continue to increase. If you assume that investors will be willing to accept the same dividend yield, then if the dividend goes up, that will mean that we'll also push up the stock price and so the dividend is definitely something to keep an eye on if you're interested in buying the stock and then finally, the risk-reward profile is a good reason to buy.
Pfizer may not produce maybe outsized biotech-type returns. But for that result, you're also taking on a lot less risk. Biotech may go up 20, 30, 40 percent in a year. But it also might fall by that much if a single drug fails. If one pipeline drug from Pfizer fails, it's not going to have a major impact on the share price compared to a small biotech.
I think the risk-reward profile, and also if that's something that you're interested in and you want something a little less risky while you're willing to accept maybe a little less potential return, or a lot less potential return. I think that's a good option for investors.
Speights: Yeah, Brian, you touched on really a lot of good points there and back to Richard's question from earlier, why not add Pfizer to a dividend growth portfolio? The stock probably is a pretty good pick for a dividend growth portfolio. It has an exceptionally strong dividend and like you said, Brian, it's probably going to continue to grow.
I think Pfizer is still maintaining that they're expecting to grow adjusted earnings in the double-digit percentages over the next five years, grow revenue by at least 6% and that's risk-adjusted.
That doesn't assume all of their pipeline candidates are going to be successful. It also excludes any other COVID programs, including their megablockbuster vaccine. I think certainly over the next five years, Pfizer looks to be in good shape. And the company knows it's losing some patent exclusivity post-2025, and it's planning for that.
Over the long run, like you said, it's not going to be the super-growth star like some biotech stocks might be, but it can deliver pretty good returns.
Orelli: I think most investors and large companies would happily take double-digit returns on the earnings side.