Pfizer (PFE -0.20%) has a shockingly high dividend yield of 6.8%. The S&P 500 Index (^GSPC +0.05%) has a 1% yield, and the average pharmaceutical stock's yield is roughly 1.5%. Given that huge disparity, it looks like Pfizer's yield is too good to be true.
There are reasons for the high yield that need to be monitored. However, management doesn't seem too worried about the dividend. Here are some reasons why, and why you might want to buy ultra-high-yield Pfizer.
Pfizer's management is focused on maintaining the dividend
Pfizer's dividend, like all dividends, is paid at the discretion of the board of directors. That said, the company's management team has been very clear about its support for the dividend. The dividend was mentioned directly on two slides in the first-quarter 2026 earnings presentation. One slide, focused on 2026 capital allocation priorities, stated that the company wants to "maintain and grow our dividend." A second slide, directed at longer-term growth, made "maintain dividend" a stated goal.
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If the board was actively considering cutting the dividend, management wouldn't likely have mentioned the dividend on those two slides. Meanwhile, it is important to examine what supports the dividend. The answer isn't earnings, which are under pressure right now, because a company's dividend payments appear on its cash flow statement. The number is fairly large for Pfizer, with the first-quarter dividend payment totaling $2.445 billion. Annualize that, and you get nearly $10 billion.
The company generated $2.6 billion from operating activities, which actually covers the dividend. However, the dividend isn't the only thing the company has to pay for. After paying dividends, paying down debt, and investing in its business, the company's cash balance at the end of the first quarter was higher than at the start. And not just a little higher, $560 million higher. The source of the extra cash was Pfizer selling long-term investments. Turning to the balance sheet, the company still has $11.3 billion in long-term investments, in addition to $1.7 billion in cash.
Watch Pfizer's dividend, but there's plenty to support it
This isn't meant to suggest that investors should simply ignore the headwinds Pfizer is facing today. While the company looks capable of supporting the dividend, investors are worried about the pharmaceutical company's future, which has pushed the stock lower and the yield higher. That said, most of the problems the company faces are normal for the pharmaceutical industry.
NYSE: PFE
Key Data Points
For example, Pfizer has several blockbuster drugs set to lose patent protection. However, its research and development haven't yet produced new drugs to fill the gap. In fact, the company has clearly fallen behind peers in the hot GLP-1 weight-loss space, after it had to stop work on a drug there in 2025. The thing is, R&D doesn't work on a timeline, even though patent expirations do. Sometimes things just don't line up as well as investors would like.
Pfizer has a long and successful history of developing drugs. Notably, in the case of GLP-1 drugs, it quickly adjusted and bought another company with a more attractive drug candidate. And it has numerous drugs working through the approval process beyond it, as well.
Think long-term with Pfizer
Pfizer is still a well-run drug company. It is just working through a difficult period, which has Wall Street worried about the future. If you think long-term, however, you may want to consider buying Pfizer and its outsize yield while everyone else is scared. The company is clearly standing behind the dividend, and when you dig a little deeper, it appears to have the wherewithal to keep supporting it.
