Pfizer has consistently been paying its shareholders a dividend for decades.
The company has also carefully raised its dividend, ensuring the payouts remain sustainable.
At a low valuation, the beaten-down stock comes with a good margin of safety.
Stocks that don’t generate strong returns can still make good dividend investments. As long as their payouts are sustainable and the businesses are in solid shape, they can be appealing options for income investors to consider. A problem arises, however, when a stock’s losses are so significant that they crush the dividend income it might generate.
Pfizer (NYSE: PFE) is a stock that might appeal to investors for its high yield. At around 6.9%, its yield is far higher than the S&P 500 average of 1.1%. The bad news is that payout is as high as it is because the stock has tanked 45% over the past five years. However, the good news is that for the past few years, it’s been a bit more stable; since 2025, it’s down 6%. Not great, but also not disastrous.
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With a bit more stability of late and a low valuation, could the beaten-down healthcare stock be worth buying for its dividend?
Image source: Getty Images.
Although Pfizer has encountered challenges in recent years, with its revenue declining significantly as demand for its COVID vaccine and pill has diminished, it has consistently paid its dividend. In June, it announced its third-quarter dividend, marking the 351st consecutive quarter in which it has paid a dividend to its shareholders.
That’s a solid track record, and while Pfizer has been careful with dividend hikes in recent years, its current quarterly payout of $0.43 has more than doubled since 2011, when it was paying $0.20. A few years ago, when the business was hitting record numbers due to COVID sales, Pfizer didn’t rush to boost its dividend significantly, which may have resulted in it being at unsustainable levels today, demonstrating management’s forward-looking and methodical approach to its payout.
Over the trailing 12 months, Pfizer’s free cash has totaled $12.4 billion, which is comfortably above the $9.6 billion it has paid in dividends. As a result, its payout doesn’t look to be in danger of being cut or suspended anytime soon. While the company faces an uncertain path forward due to patent cliffs on key drugs, it’s also been investing in future growth opportunities via acquisitions.
Pfizer isn’t a risk-free stock to invest in, but with a low valuation — it trades at less than nine times its future earnings (based on analyst projections) — I think there’s a good margin of safety with this investment, and it may be worth buying right now.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.
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