By their inherent nature, established pharma companies face a demand backdrop that is stable because consumers rarely cut medical spending, even in tough times. These characteristics give these companies a cushion for stable, albeit sometimes slow growth. It also provides well-established pharma firms with the deep pockets and strong balance sheets needed to pay steady dividends.
Pfizer (NYSE:PFE) is one such stock that has long been at the cornerstone of the pharma industry for decades and so its status as a longstanding dividend giant doesn’t come as a surprise. With that said, Pfizer’s share price has not performed especially well in recent times, and one primary reason for this is the loss of revenues from COVID-19 vaccines.
Over the past year, the company’s stock has declined by close to 5%, while over the past six months, this number has almost doubled to close to 12%. But the company remains a dividend-paying giant and management is shifting focus to other avenues. Against this backdrop, is Pfizer still a stock to buy for its dividend or worth avoiding because of share price risk?
How Is Pfizer’s Dividend & How Does It Match Up Against Other Pharma Giants?
Pfizer initiated quarterly dividend payments almost a half century ago. So far, these dividend payouts have grown but have also been peppered with a few cuts in between.
The last declared quarterly dividend was $0.43 per share which translates to Pfizer paying an annual dividend of $1.72 per share, yielding a solid 6.74% at the prevailing share price.
Investors might be interested to know that this is higher than its own four-year average of 4.41%. With this dividend, the company also has a 14-year record of consecutive payout growth. The payout ratio can’t really be deemed conservative or aggressive, sitting at a respectable 54.02%.
So, Pfizer has the hallmarks of being a solid dividend with a nice track record, but how does it fare when we pitch it against a few other pharma stocks, such as Merck & Co., Inc. (NYSE:MRK), AbbVie Inc. (NYSE:ABBV), Eli Lilly and Company (NYSE:LLY), and Johnson & Johnson (NYSE:JNJ).
Eli Lilly is the largest out of these, paying a sizeable annual dividend of $6 per share but yielding only 0.71%. Abbvie has the highest dividend figure out of this group at $6.56 per share but yields 3.40%.
Merck has a similar yield at 3.90% on a $3.24 per share annual dividend. Johnson & Johnson has a $4.96 per share dividend, yielding 3.18% on it. So when compared to the stocks discussed in the dividend-paying healthcare equity pool, Pfizer is outperforming all of them on yield.
In that sense, yes, Pfizer can be called the industry-leading pharma giant dividend-payer, but there are usually other factors to consider, like how Eli Lilly has the highest dividend growth over the recent past out of this lot, or how Johnson & Johnson has a whopping 62 years of consecutive dividend growth under its belt.
What Is on Pfizer’s Plate for the Near Future?
This is the decade when big pharma loses patents for some of its notable drugs. Pfizer is also one of those companies that is set to lose some gems from its cupboard. A big blow would definitely be losing the Eliquis’ patent. The clot-fighting drug is sold jointly by Pfizer and Bristol-Myers Squibb Company (NYSE:BMY).
The companies were able to keep copycats at bay after settlements and a notable lawsuit that protects the drug till 2026. The drug also has a formulation patent that doesn’t expire until 2031. Apart from Eliquis, PFE is also set to face a patent cliff, with notable names like prostate cancer treatment Xtandi and pneumonia prevention drug Prevnar 13.
On the other hand, Pfizer’s pipeline strengths can’t be ignored. The company has 115 formulations in its pipeline. Five of them are already going through the registration phase, 51 of them are in Phase 1, 27 in Phase 2, and 32 in Phase 3. So, there’s a lot waiting on the plate if Pfizer loses some patents.
Is Pfizer a Good Dividend Stock?
Pfizer is a good dividend stock, paying a 6.64% yield and a track record of increasing payouts for 14 years straight.
Management last reported fourth quarterly and full-year results for fiscal 2024, announcing a 7% year-over-year increase in the top line to $63.63 billion. For Q4, the company managed to top analysts’ estimates by growing revenue by a solid 22% from the prior year’s period to $17.76 billion.
For Q4, Pfizer reported $0.63 per share earnings on a non-GAAP basis, which also topped what the analysts were expecting of it by a major margin. Last year, the backdrop was tricky to navigate for Pfizer, as it was looking into cost cuts as the COVID-19 business waned. Quite contrarily, for the same quarter, the COVID business also performed stronger than expected, while its cancer products also buoyed its non-COVID business.
Now, investors are looking into whether this pharma giant manages to grab a share of the weight-loss drug market, which is extremely lucrative right now and is exciting investors. If it can elbow its way into that category, the share price may well reward shareholders more handsomely than the dividend.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.
