Cathie Wood and high dividend yields go together like... well, it's hard to finish that sentence because they don't go together at all. Wood and her Ark Invest funds are known for investing in innovative growth stocks, not stocks with exceptionally attractive dividends.
But Pfizer (PFE 0.55%) stood out as an exception to the rule. Wood initiated a position in the big drugmaker for her Ark Genomic Innovation ETF in 2021. However, she has sold this high-yield dividend stock in recent months. Should you sell Pfizer too?
Farewell, Pfizer
At the end of 2023, Wood's Ark Genomic Innovation ETF owned nearly 500,000 shares of Pfizer. Only 16 days later, the holding was drastically reduced after Wood sold more than 337,000 shares. More selling would follow shortly.
During the first five days of March, the Ark Genomic Innovation ETF sold nearly 113,000 Pfizer shares. Over the subsequent week, the selling continued.
Today, the Ark Genomic Innovation ETF doesn't list Pfizer among its 40-plus holdings. After owning the big pharma stock for over two years, Wood appears to have said farewell to Pfizer.
Why doesn't Wood like Pfizer anymore?
These moves raise the question: Why doesn't Wood like Pfizer anymore? One answer can be found simply by looking at the company's stock chart since she first purchased shares in the third quarter of 2021.
Stocks don't perform as dismally as Pfizer has for no reason, though. There are two underlying causes behind the steep plunge for the big pharma stock.
First, sales for Pfizer's COVID-19 vaccine Comirnaty and oral antiviral therapy Paxlovid have tanked. The demand for these products has declined sharply as the world has moved into a post-pandemic phase. In the U.S., the transition from the federal government paying for the vaccines to a private market also impacted sales.
Second, Pfizer faces a major patent cliff over the next several years. Top-selling drugs including Eliquis, Ibrance, Inlyta, Xeljanz, Xtandi, and Vyndaqel will lose key patents between 2025 and 2027.
Wood almost certainly was fully aware of Pfizer's looming patent expirations when she first bought the stock. However, she might not have anticipated the big drop in COVID-19 sales. Wood also perhaps was betting that Pfizer would emerge as a big winner in the obesity market. In June 2023, though, the company threw in the towel on developing the once-a-day weight-loss pill lotiglipron. In December, Pfizer discontinued the development of its twice-daily version of obesity pill danuglipron.
Sell Pfizer too?
Should others sell Pfizer stock as Wood has? Each investor has different objectives. Maybe Pfizer is no longer a good fit for some portfolios. However, I think holding onto Pfizer and even buying more shares is smarter than selling for most investors.
Pfizer's dividend yield currently tops 6.1%. The company doesn't have to deliver much share price growth to give investors attractive total returns with that juicy dividend. And the dividend appears to be sustainable at current levels.
I expect Pfizer's share price to rise quite a bit over the next few years too. It's already priced at a discount. The company's new products and new indications for existing products should generate more than enough additional revenue to make up for the upcoming patent cliff. Pfizer's business development deals, including the recent acquisition of Seagen, should contribute another $25 billion per year in new annual revenue by 2030.
Wood's decision to bid farewell to Pfizer might be the best move for Ark Invest. Most other investors, though, will likely fare well over the long term by buying the high-yield dividend stock at its current valuation.
