2 Ultra-High-Yield Dividend Stocks Down 47% or More to Buy Hand Over Fist Right Now

Does a rising tide lift all boats? Not always. The S&P 500 is now officially in a new bull market, but not every stock has benefited.

Just because a stock is down doesn't mean it's not a good pick, though. That's especially the case when it pays you handsomely to wait for better days. Here are two ultra-high-yield dividend stocks down 47% or more to buy hand over fist right now.

Devon Energy: An improving outlook and attractive valuation

Shares of Devon Energy (DVN 0.19%) are 47% below their peak set in mid-2022. There are several factors behind this steep sell-off. Oil prices fell and high inflation drove the oil and gas producer's costs higher. As a result, Devon wasn't able to generate as much free cash flow. This caused the company to cut its dividend, pushing some investors away in the process.

Despite all of these challenges, Devon Energy still offers one of the most attractive dividends in the S&P 500. Its dividend consists of two parts -- a fixed component and a variable component based on excess free cash flow. Devon's dividend yield currently stands at roughly 7%.

The stock's valuation also is more attractive than it's been in quite a while due to the sell-off. Devon's shares trade at under 6.6 times forward earnings estimates. By comparison, the average forward price-to-earnings multiple for the S&P 500 energy sector is 11.2.

Importantly, Devon's outlook is improving considerably. The company's free cash flow has rebounded somewhat and this enabled Devon to increase its dividend payout by 57% in the third quarter of 2023 versus the Q2 level.

Devon expects its capital spending to decline by 10% this year. It looks for free-cash-flow growth of around 20%, which will push its variable dividend higher. The company also thinks that it will be able to increase its fixed dividend payout.

Those aren't just pie-in-the-sky projections. Devon's well productivity has improved significantly. Service costs should experience deflation rather than inflation, and experts are predicting that oil prices will rise moderately in 2024.

Pfizer: A better story than meets the eye

Pfizer (PFE 0.55%) is another stock that has taken a shellacking over the last couple of years. Shares of the big drugmaker are now nearly 54% below the high from late 2021. Declining demand for the company's COVID-19 products and worries about upcoming patent expirations for other top-selling drugs have weighed heavily on investors' minds.

However, I think there's a much better story for Pfizer than meets the eye. Let's start with the company's dividend yield of roughly 6%. CFO Dave Denton emphasized in the Q3 earnings call in October that one of Pfizer's core capital allocation pillars is to continue growing its dividend.

2024 could be a trough year for Pfizer's COVID-19 sales. The company appears to have moved past the overstocking issues experienced last year and it has completed the transition from a government-purchase model for COVID-19 vaccines to a private market. Pfizer hopes to have a combination COVID-flu vaccine on the market in 2025.

To be sure, several of Pfizer's key drugs will lose patent exclusivity over the next few years. They include blood thinner Eliquis, breast cancer drug Ibrance, and prostate cancer drug Xtandi. However, the company appears to have a good strategy in place to handle these challenges.

Pfizer thinks that its new product launches and expansions of labels for existing products to include new indications will add roughly $20 billion in new annual revenue by 2030. It expects another $25 billion in additional annual revenue by 2030 from business development deals. The recent acquisition of Seagen by itself could deliver $10 billion in new revenue. These revenue sources should not only fully offset the lost sales from patent expirations but also drive solid growth through the rest of the decade.

The pharma stock is a bargain with shares trading at only 12.6 times forward earnings estimates. It might take some time for investors to look beyond Pfizer's near-term headwinds. However, I think the long-term prospects for this beaten-down ultra-high-yield dividend stock are bright.