It's been a tough stretch for pharmaceutical giant Pfizer (PFE 1.42%). The company enjoyed a vaccine windfall during the COVID-19 pandemic, but revenue and profits cratered as the pandemic eased and those tailwinds stopped blowing. The stock has tumbled, sending Pfizer's dividend yield to a whopping 7.3%.
But Pfizer's stock price recently bounced on its second-quarter earnings. Investors have been looking for a glimpse into Pfizer's future, and there is a lot to like as things begin to come into view.
Here is why Pfizer's newfound momentum could set the stock up to soar in 2026.
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Prudent financial management secures a generous dividend
Pfizer's generous dividend has become a big reason why many people consider owning the stock. It's not easy to find a 7.3% dividend yield, and oftentimes, stocks that do are yield traps with significant underlying risks.
While the market's negative sentiment toward Pfizer and the company's post-pandemic struggles have driven the share price down and the yield higher, the dividend itself is on solid footing. Management has raised the dividend for 15 consecutive years, so losing those pandemic-related profits didn't force a dividend cut. Additionally, the current dividend of $1.72 per share is well below the mid-point of management's 2025 adjusted EPS guidance of $3 per share.
In other words, Pfizer is still earning plenty of money to afford its dividend, and is using that cushion to, wisely, pay down debt to improve its balance sheet. That's prudent financial leadership, and should give investors some confidence that they can count on the stock's robust 7.3% yield as a nice baseline for the stock's future returns.
Is Wall Street sleeping on Pfizer's growth?
It seems the broader market is cautious toward healthcare stocks at the moment. Not only could tariffs raise costs for drug companies, but there is also pressure from the Trump administration to cut prescription drug prices for Americans.
However, Pfizer seems to be increasingly confident that it can navigate these headwinds and grow its business. Management recently raised its 2025 adjusted earnings guidance from a range of $2.80 to $3.00 per share to $2.90 to $3.10. The company has focused its growth efforts on oncology and specialty drugs, which are less likely to face pricing pressure. And that's precisely where Pfizer is growing the most; the company's specialty drug sales are up 6% year over year, and oncology sales are up 9% through six months of 2025.
As specialty and oncology drug sales increase, they should have a greater effect on Pfizer's overall growth. These two segments combined for approximately $16.5 billion through six months of this year. Pfizer's primary care drug sales, totaling $11.2 billion, are down 8% year over year as COVID-19 sales continue to fall off. Six-month sales of Pfizer's COVID-19 drugs are now less than $2 billion, so their impact on the numbers is drying up. Additionally, Pfizer's top seller, Eliquis, faces patent expiration but likely won't face generic competition until at least 2028.
Analysts only anticipate Pfizer earning $3.10 per share next fiscal year, but that could be too conservative, given Pfizer's momentum in oncology and specialty drugs and the resulting boost to this year's guidance. It seems tariff and political concerns are weighing on short-term expectations. If you zoom out, analysts anticipate Pfizer growing earnings at an annualized rate of 9% over the next three to five years, which seems to underline the good things happening in the business.
The conditions are ripe for a dramatic sentiment boost, making Pfizer a coiled spring at its current price
So, what does this all mean? There's an argument that Pfizer's stock could face a boost in sentiment if the dark clouds (tariffs and political pressure) clear out, allowing investors to refocus on Pfizer's growth in oncology and specialty drugs.
Today, Pfizer trades at just 8 times the midpoint of its 2025 earnings guidance. That valuation resembles a company on the verge of going under, not one that could grow at a high-single-digit pace over the coming years. Even if the valuation stays the same, Pfizer needs very little growth to generate double-digit investment returns because the dividend starts you off at over 7%.
If things do go well and Wall Street warms up to Pfizer, the stock could produce some seriously outsized returns from a lucrative trifecta of:
- A 7.3% dividend
- Potential high-single-digit growth
- A valuation that could soar with some positive sentiment
It makes Pfizer a fantastic choice for income-focused investors, as well as bargain hunters looking for some upside in a market already trading at all-time highs, chugging toward 2026.
