Pfizer

Pfizer (PFE -0.34%) has a huge 6.3% dividend yield. That’s actually a lot lower than it was not too long ago, thanks to a large stock advance in recent days based on news. But Pfizer’s price rebound actually started in April. Is it time to jump in before more on Wall Street start buying Pfizer’s depressed stock?

Image source: Getty Images.

What does Pfizer do?

Pfizer is a pharmaceutical company. This is a highly complex business that involves huge costs. A company needs to find potential new drug candidates, which requires a material commitment to research staff and facilities. Promising drugs then need to be researched and developed. Then they need to go through the approval process. And finally, assuming the drugs are actually useful and safe, they need to be marketed.

There are massive costs all along the way in what is a very long process of bringing a drug to market. As such, drug makers are granted a temporary period in which they have the exclusive right to sell a newly developed drug. That can lead to huge profits, at least for a period of time. When a drug patent runs out, competitors can make generic versions of the drug, which usually leads to the revenue from the original drug falling drastically. That’s known as a patent cliff.

Drug companies are always working to develop new drugs to offset the income statement hit when patent cliffs come up. That’s the big-picture cycle that Pfizer is always in the middle of. And it has done a very good job of managing to survive and thrive over time. But new drugs and patent cliffs don’t always line up quite as well as hoped, so there can be material short-term turbulence in earnings.

PFE data by YCharts

What’s up with Pfizer’s big price drop?

Pfizer’s stock price is currently down over 50% from the peaks it hit in late 2021. That high water mark was a bit of an anomaly, as it coincided with the coronavirus pandemic. Wall Street extrapolated the vaccine opportunity from COVID-19 way too far into the future. When the world learned to live with the illness, Pfizer’s stock plunged.

On top of that, Pfizer is currently facing down a patent cliff, with drugs for oncology (Ibrance) and cardiovascular health (Eliquis and Vyndaqel) set to lose patent protections in 2027 and 2028. This is a notable issue and it won’t be simple to solve. In fact, after the company’s own weight loss drug flamed out.

However, Pfizer has just inked an acquisition to gain access to a new weight loss drug opportunity. The deal to buy Metsera (MTSR 0.19%) is expensive and fairly complex, involving an earnout provision. The upfront cost is $47.50 per Metsera share (roughly $4.9 billion), with three earnouts that could add $22.50 per share to the cost. That said, this deal quickly solves a problem for Pfizer.

Pfizer has also made quick work of dealing with increasing regulatory pressure. It was the first company to come to an agreement with the U.S. government around drug pricing. The “specific terms of the agreement remain confidential,” but Pfizer has agreed to make material capital investments in U.S.-based assets in an effort to avoid tariffs.

Both of these moves appear to have resulted in Wall Street taking a more positive view of Pfizer’s future. The tariff deal, specifically, led to a huge one-day gain in Pfizer’s stock. That said, there is still a lot of work to do before Pfizer’s business fortunes are on the mend. But the situation does appear to be brightening.

Has enough changed to make Pfizer a buy?

Pfizer’s payout ratio is quite high, hovering around 90%. And the board of directors has made the call to cut the dividend in the past, specifically in 2009 when Pfizer bought Wyeth. That cut and the lofty payout ratio make Pfizer a potentially risky choice for conservative income investors looking a reliable dividend, even though the stock’s yield is attractively high.

That said, as a turnaround investment, Pfizer looks a lot more attractive. As the drug company has done before, it is taking the steps necessary to survive and thrive over the long term. In fact, the stock has risen from a 52-week low around $22 to a recent price of roughly $27, which is a 20% increase.

Clearly, Wall Street is starting to see the silver lining in Pfizer’s clouds. And if the dividend survives the current headwinds, all the better. Just be careful if you go in counting on that dividend to survive.

There are a number of reasons to believe that Pfizer (PFE -0.90%) is an attractive dividend stock. The lofty 6.9% dividend yield is the obvious first reason, but the healthcare giant also has a long history of being well run. That said, if you are thinking of stepping in to buy Pfizer today, you’ll want to know these three facts before you do.

Image source: Getty Images.

1. Wall Street is worried about normal business gyrations

Pfizer is a pharmaceutical company. The drugs it makes are highly complicated to find, test, and develop. This is why drug makers are granted a temporary monopoly on new discoveries. However, the patent protection that companies like Pfizer get eventually end.

And when that happens competitors bring out generic versions of the products at lower price points. This is what’s known as a patent cliff in the drug sector. Pfizer has a couple of big drugs expected to lose patent protection in the years ahead. As such, investors are closely watching, and worrying about, Pfizer’s drug pipeline.

On top of that, there’s a bit of uncertainty in the healthcare sector right now because of regulatory changes taking place in the United States. The new administration in Washington is viewing the healthcare industry, and particularly drug makers, in a more critical light. That has investors worried about the future, too. And as you might expect, stocks like Pfizer have been performing weakly. That’s why the dividend yield is so high today.

The thing is, drug discovery is lumpy and regulatory changes aren’t abnormal. From a big-picture perspective, Pfizer is just dealing with typical business gyrations. It has successfully done so before and will likely continue to be a long-term survivor this time around, as well. Concern is justified, but these aren’t issues that will spell the end of this industry-leading pharma stock.

2. Pfizer cut its dividend, Merck did not

Pfizer has increased its dividend annually for 15 consecutive years. That streak, however, follows a dividend cut. This isn’t meant as a warning that a another dividend cut is imminent. In fact, that doesn’t seem very likely at all, noting that the adjusted earnings dividend payout ratio was 55% in the second quarter of 2025.

But Pfizer isn’t the only pharma stock you can buy. Competitor Merck (NYSE: MRK) has a lower 3.9% or so dividend yield, but it has a dividend that has trended generally higher over time. Not every year, mind you, but when Pfizer cut its dividend during the Great Recession, Merck did not. The same basic story is in play with Bristol-Myers Squibb, which has a nearly 5.3% yield. If dividend consistency is important to you, you may want to consider stepping down on yield.

PFE Dividend data by YCharts

3. A drug company isn’t the only way to invest in the pharma niche

There’s also a big-picture consideration to make here about drug maker Pfizer. You can get a 6.4% yield from real estate investment trust (REIT) Alexandria Real Estate. Why would a REIT be an alternative to a pharma stock? Alexandria’s business focus is on leasing research space to healthcare companies like Pfizer. OK, Pfizer isn’t one of the REIT’s largest tenants, but Eli Lilly, Moderna, and Bristol-Myers Squibb are the top three tenants. Merck is No. 17.

Investing in Alexandria is a way to get exposure that sidesteps the typical drug cycle, since rent still has to be paid even after a patent cliff. The big story here, however, is that research and development is vital to the pharma industry. So Alexandria’s tenants can’t simply stop their research efforts if they want to remain competitive. 

To be fair, Alexandria’s yield is historically high today because it is working through a difficult period. Notably, occupancy has dropped around four percentage points in just six months. But it is still a well-positioned business (occupancy remains over 90%) and likely to survive without the need for a dividend cut. If you are looking at Pfizer, you should at least take the time to consider this REIT as a high-yield alternative.

Pfizer is fine, but not the only option

The upshot here is that buying Pfizer is probably not a huge mistake, even for more conservative investors. But the dividend history has a material blemish on it that you won’t find with some of its direct competitors. And if you don’t like the inherent volatility of the drug discovery process, there are “picks and shovels” alternatives, like Alexandria, that you might want to consider instead.

Basically, Pfizer is OK, but not the only dividend choice you have at your disposal to get exposure to the pharmaceutical sector.

May 14 (UPI) — The European Court of Justice Wednesday ruled there was no plausible reason to block The New York Times from getting European Commission President Ursula von der Leyen’s texts with a Pfizer executive.

The commission blocked the texts from being released to the newspaper, claiming it did not hold them.

“The Commission decision refusing a journalist of The New York Times access to the text messages exchanged between President von der Leyen and the CEO of Pfizer is annulled,” the court ruling said.

The court said Matina Stevi, a journalist with The New York Times, requested access to all text messages between von der Leyen and Pfizer CEO Albert Bourla between Jan. 1, 2021, and May 11, 2022.

The texts were secret messages before a multi-billion-dollar vaccine deal was reached between the European Union and Pfizer.

The commission rejected the request for the texts on the grounds that the commission did not hold the requested documents.

But the court ruling said Stevi and The New York Times “succeeded in rebutting the presumption of non-existence and of non-possession of the requested documents.”

The court added that the commission “has not given a plausible explanation to justify the non-possession of the requested documents.”

The court found the commission should have provided a more detailed explanation on why the documents were withheld.

The commission has the right to appeal the decision.

“The commission will now closely study the General Court’s decision and decide on next steps. To this effect, the Commission will adopt a new decision providing a more detailed explanation,” it said in a statement.

“Transparency has always been of paramount importance for the commission and President von der Leyen. We will continue to strictly abide by the solid legal framework in place to enforce our obligations.”

HEC Paris Business School law professor Alberto Alemanno said the court decision would enhance accountability for EU leaders.

“This judgment provides a fresh reminder that the EU is governed by the rule of law, with its leaders subject to the constant scrutiny of free media and of an independent court,” Alemanno said.

Dutch MEP Raquel Garcia Hermida-van der Walle called the court decision a “slam dunk for transparency.”

“People just want and are allowed to know how decisions are made, it is essential in a democracy. Even if it was done over a text message,” she said.