After steadily raising its payout by 163% over the past 15 years, Pfizer (PFE 0.29%) continues to be one of the most reliable pharma stocks an income-seeking investor can reach for these days. The company is a pharmaceutical giant with many parts moving in different directions. Some of its blockbusters are losing market exclusivity, but it's also developing plenty of new drugs to take their place.
Despite a productive development pipeline and a remarkable track record, shares of Pfizer offer a great big 6% dividend yield at recent prices. Here's why it's a great stock for income-seeking investors to buy now and hold for the long run.
NYSE: PFE
Key Data Points
Not as bad as it looks
At a glance, Pfizer's first-quarter results look awful. Revenue sank by 19% year over year at constant-currency rates. Such a big drop looks like a red flag but it's not as bad as it seems.
Sales of Comirnaty, Pfizer's COVID-19 vaccine, and Paxlovid, its antiviral treatment, fell much faster than expected. If we exclude the company's COVID-19 product sales, though, total revenue actually rose by 11% year over year.
Now that sales of Pfizer's COVID-19 products have fallen to just 16% of total revenue, their continued decline will be much easier to manage.
More ups than downs ahead
The main patents that protect market exclusivity generally last just 25 years from the time a company begins developing a new drug. Pre-commercial stage development tends to consume about half of this limited time frame. Once a drug loses exclusivity, generic or biosimilar competition can pull the rug out from under its sales practically overnight.
The short-lived nature of drug patents means established pharmaceutical companies always have at least a couple of important revenue streams that are drying up. Pfizer's a good dividend stock to buy because its rate of new product launches is outpacing the patent cliffs.
At the moment, Eliquis, a next-generation blood thinner that Pfizer markets in partnership with Bristol Myers Squibb, is its top-selling product. At the moment, it seems like Eliquis generics won't be available in the U.S. until 2028, although there's a chance that competition could begin as soon as November 2026.
By the time Eliquis tumbles over its upcoming patent cliff, Pfizer could have several new blockbuster drugs to offset the losses. Its recent acquisition of Seagen added four oncology treatments, including Padcev.
Last December, the U.S. Food and Drug Administration expanded Padcev's indications to include newly diagnosed bladder cancer patients. This indication alone will likely add more than $1 billion in annual sales because newly diagnosed patients tend to stay on therapy much longer than folks who have already relapsed.
Padcev won't be the only blockbuster pushing up profits over the next several years. In 2023, the FDA approved a whopping nine new drugs from Pfizer, which was a company record.
Room for more dividend growth ahead
This year, Pfizer expects adjusted earnings to land in a range between $2.15 per share and $2.35 per share. That's more than enough to meet a dividend commitment currently set at $1.68 per share annually.
In the near term, raising profits to a level that can cover the company's dividend commitment shouldn't be too difficult. Like most companies that experienced a COVID-19-related windfall, Pfizer started 2024 with more employees than it needs. Rightsizing its employee roster is expected to deliver at least $4 billion in annual cost savings by the end of the year.
With an ultra-high dividend yield and heaps of new drugs that can help it raise its payout, Pfizer looks like a great dividend stock to buy now.
