How many profitable, large-cap healthcare companies pay a dividend yield of over 5%? Only one.
Pfizer (PFE 1.61%) checks off all the boxes. It's profitable, raking in earnings of over $9.4 billion in the first nine months of 2025. The big drugmaker's market cap is over $140 billion. And Pfizer's forward dividend yield is a juicy 6.9%.
All that sounds great. But how safe is Pfizer's dividend as 2026 begins?
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By the numbers
One reason why many investors could be asking this question is Pfizer's high dividend payout ratio of 99.4%. This metric represents a company's dividend per share divided by its earnings per share. Pfizer is barely generating enough earnings to cover its dividend.
A dividend payout ratio of nearly 100% may seem to indicate a high likelihood of a looming dividend cut. However, earnings-based payout ratios don't tell the full story. Net income (earnings) includes non-cash expenses such as amortization and depreciation that don't affect a company's ability to fund its dividend.
Fortunately, there's another financial metric we can examine to gain a better understanding of Pfizer's dividend health. Free cash flow refers to the cash generated from operating activities, minus capital expenditures, and represents the amount of cash available for investment or distribution.
Pfizer generated free cash flow of $10.4 billion in the 12 months ending Sept. 30, 2025. During this period, the pharma giant paid out $9.7 billion in dividends. This reflects a free cash flow payout ratio of 93.3%.
While we're discussing numbers, however, there are two other figures to consider: 16 and 349. Pfizer has increased its dividend for 16 consecutive years. The company has declared dividends for 349 consecutive quarters, a streak that dates back to 1937. Impressive track records can come to a screeching halt, of course. However, they can also put pressure on management teams to keep the dividends flowing.
NYSE: PFE
Key Data Points
Beyond the numbers
That leads me to another factor to consider with Pfizer's dividend safety that goes beyond the numbers. The company's management has repeatedly reaffirmed a strong commitment to the dividend program.
Pfizer CEO Albert Bourla stated in the drugmaker's third-quarter earnings call that the company remains "committed to our dividend." In discussing Pfizer's capital allocation strategy, CFO David Denton stressed, "Our strategy consists of maintaining and growing our dividend over time."
However, Pfizer also faces a significant patent cliff. Blood thinner Eliquis and autoimmune disease drug Xeljanz lose U.S. patent exclusivity this year (although the first generic for Eliquis won't be marketed until 2028). Breast cancer drug Ibrance and prostate cancer drug Xtandi follow suit in 2027.
Rapidly declining sales for the blockbuster drugs could put intense pressure on Pfizer's earnings and free cash flow if the company didn't have a good backup plan. But management doesn't appear to be worried. Denton noted in the Q3 earnings call that Pfizer plans to invest in products that it has acquired and recently launched "because those will ultimately allow us to offset the LOEs [losses of exclusivity] over the next several years."
Is Pfizer's dividend safe?
Let's return to the initial question: How safe is Pfizer's dividend as 2026 begins? I think the best answer is that it isn't as safe as most income investors would prefer, but the likelihood of a dividend cut this year is low.
Pfizer's free cash flow dividend payout ratio of 93.3% isn't ideal, but it is much less concerning than the earnings-based payout ratio of 99.4%. Although the patent cliff will hurt the company's earnings and free cash flow, management believes that other products will be able to largely offset this impact.
Could management make a 180-degree turn and decide to cut the dividend in 2026, despite previously making comments about a strong commitment to the dividend program? It's possible, but I don't think it's probable.
Like many Pfizer shareholders, I'd love it if the drugmaker had stronger coverage of its dividend. I wish the company didn't face uncertainty related to several key products losing patent exclusivity. However, I'm not worried about a dividend cut. Pfizer's dividend appears to be relatively safe as we enter a new year.
