As COVID-19 was labeled a global pandemic by the World Health Organization in March 2020, many pharma companies began their research aimed at introducing lifesaving vaccines and treatments to combat the disease.
No company was arguably more critical to this mission than the pharma stock Pfizer (PFE), which introduced the first-to-market COVID-19 vaccine -- alongside its German partner BioNTech (BNTX 0.38%) -- called Comirnaty. And more recently, Pfizer has brought to market its anti-viral COVID-19 pill known as Paxlovid.
Without even considering its leadership on the COVID-19 front, I believe Pfizer is an excellent pick for both value investors and income investors who find themselves with $1,000 available to invest. Let's take a closer look at four reasons why.
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1. A robust non-COVID drug portfolio
Of all the big pharma stocks, Pfizer undoubtedly had the best year. This is reflected by its impressive sales and earnings growth.
Pfizer's net revenue skyrocketed 95% higher year over year to a whopping $81.3 billion in 2021. Since a meaningful portion of Johnson & Johnson's (JNJ -0.50%) $93.8 billion in 2021 sales was derived from its medical devices and consumer health segments, Pfizer is now the largest pure-play pharma stock in the world by revenue.
Pfizer's $36.7 billion year-over-year increase in COVID-19 product sales (e.g., Comirnaty and Paxlovid) to $36.9 billion during 2021 accounted for the vast majority of its revenue growth (92.6%). But even factoring out COVID-19 sales, the company's revenue advanced 6% year over year to $44.4 billion.
Pfizer's blockbuster prostate cancer drug Xtandi -- co-owned with Japan's Astellas Pharma (ALPMY 0.90%) -- grew its sales by 15.7% year over year to $1.2 billion in 2021. Pfizer's kidney cancer treatment Inlyta notched a 27.3% increase in revenue to the blockbuster milestone of $1 billion during the year. Sales gains from these two drugs as well as its biosimilar cancer drugs were the major contributors that allowed Pfizer's total oncology revenue to vault 13.5% higher to $12.3 billion in 2021.
Then there's Pfizer's anticoagulant blockbuster Eliquis -- co-owned with Bristol Myers Squibb (BMY 0.35%) -- which generated $6 billion in revenue in 2021, or 20.6% more than the year-ago period.
Thanks to Pfizer's much higher sales base and slightly higher profitability, adjusted diluted earnings per share soared 95.6% higher to $4.42 in 2021.
2. A pipeline to support decent and steady growth
While Pfizer's near doubling of revenue and earnings in 2021 was likely a one-time anomaly that won't be repeated, the company still looks like it has moderate growth in its future. That's because it has 79 indications in different stages of clinical trials and 10 indications in the final step to commercialization, which is referred to as registration.
First, Pfizer's promising vaccine candidate for the seasonal respiratory syncytial virus (RSV) could produce over $2 billion in annual peak sales, which would make it the company's next blockbuster vaccine.
Secondly, Pfizer's Cibinqo was recently approved by the U.S. Food and Drug Administration (FDA) to treat patients with moderate to severe eczema. This indication alone could haul in $1 billion in annual sales for the drugmaker.
Finally, ritlecitinib could chip in $750 million in annual revenue within the alopecia areata market if ultimately approved by the FDA.
By themselves, these pipeline candidates are respectable. But they only scratch the surface of the potential of Pfizer's pipeline, which is why analysts are forecasting 7% annual earnings growth over the next five years.
3. A market-beating dividend and conservative payout
Pfizer's dividend payout ratio is positioned to be just 25%, based on the $6.45 midpoint of its adjusted diluted EPS guidance for 2022. This gives the company plenty of flexibility to execute a balanced approach of debt repayment, share buybacks, dividend increases, and acquisitions to further bolster its already strong pipeline.
That's why I believe Pfizer will hand out at least mid- to upper-single-digit percentage annual dividend increases in the foreseeable future. And paired with a market-beating 3.2% dividend yield, that's an attractive combo of yield and growth potential.
4. Pfizer is an exceptional value stock
The ongoing market correction that has sent the S&P 500 index tumbling 12% year to date has also hit Pfizer's stock. Shares of the drugmaker are down 11% year to date, which has made a cheap stock even cheaper.
Pfizer is trading at a forward price-to-earnings ratio of 9.2, which is well below the industry average of 10.9. And Pfizer's expected 7% annual earnings growth over the medium term matches the industry average. That's what makes the stock so compelling for income and value investors. At the current $50 share price, investors could purchase 20 shares of this blue-chip stock with a $1,000 investment.
