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Pfizer's 6.9% Yield & Bullish Signal: A Prime Buying Opportunity?
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Key Takeaways
Pfizer posted Q2 revenues of $14.7B, up 10% year over year, with EPS rising 30% to $0.78.
A 6.9% dividend yield, five hikes in five years, and Seagen's boost support payout sustainability.
New launches and a golden cross chart pattern bolster optimism despite looming patent expirations.
Pfizer Inc.’s (PFE - Free Report) shares have faced difficulties in gaining momentum after achieving success during the COVID-19 pandemic. However, a recent strong quarterly report and a bullish technical chart suggest a possible turnaround, prompting consideration of whether it is a favorable moment to invest, particularly given its current juicy dividend yield. Let’s analyze –
Pfizer’s High-Yield Benefits Income Lovers
Currently, Pfizer’s high yield cushions investors against tariff-related woes and rising consumer prices in the United States. Pfizer’s dividend yield is approximately 6.9%, and the company has increased its dividend five times over the past five years.
At present, the payout ratio of Pfizer is 51% of earnings. This means the company is providing just over half of its net earnings to its shareholders in the form of dividends, which should entice investors who prioritize income generation. Moreover, Pfizer’s payout has grown by 2.56% over the past 5 years, indicating that the company is committed to sharing profits with shareholders and reinvesting a portion of its earnings in the business for growth.
Image Source: Zacks Investment Research
However, in the first half, Pfizer’s cash inflow was just $571 million compared to dividend payments of $4.9 billion. So, can Pfizer sustain its dividend payout? Not to worry! During the company’s second-quarter earnings call, CFO David Denton assured that Pfizer is expected to see an improvement in cash flows in the second half of the year.
However, Pfizer is facing the loss of exclusivity (LOE) of some of its best-selling drugs as generics and biosimilars erode its market share. The loss of revenues may impact dividend payments. However, CEO Albert Bourla said that such losses will be offset by recent launches of new drugs, in particular, Elrexfio and Sigvotatug vedotin, which treat multiple myeloma and non-small-cell lung cancer, respectively.
Returning to Denton, he told analysts during the second quarter conference call that Pfizer’s acquisition of Seagen will keep boosting cash flow faster than expected, giving the company more financial flexibility to sustain and increase dividend offerings in the future.
Buy Pfizer Stock Now or Adopt a Wait-and-Watch Approach?
Pfizer’s innate ability to maintain and grow dividends, along with its potential to enhance cash generation, should support research and development, solidifying its position in the competitive pharmaceutical landscape.
Pfizer’s upbeat second-quarter results have already instilled faith in the company’s growth story. Pfizer’s second-quarter sales for its COVID-19 medicine Paxlovid and vaccine Comirnaty experienced year-over-year growth. Additionally, one of its new launches, the Abrysvo vaccine, also witnessed an uptick in sales. Its cancer drugs, Xtandi and Padcev, remained the top-selling products, helping Pfizer’s revenues reach $14.7 billion in the second quarter, up 10% year over year. Adjusted earnings per share (EPS) came in at $0.78, an increase of 30% from the year-ago levels.
To top it off, a golden cross pattern emerged for Pfizer last month. Pfizer’s short-term 50-day moving average (DMA) has crossed above its long-term 200 DMA, signaling an uptrend in its share price.
Image Source: Zacks Investment Research
Thus, stakeholders should retain Pfizer stock for long-term benefits, while new investors may want to wait due to challenges in selling coronavirus products post-pandemic, patent expirations for Eliquis and Xtandi, and increasing competition in immuno-oncology. In the field of breast cancer, Pfizer’s IBRANCE is facing stiff competition from Novartis AG’s (NVS - Free Report) Kisqali and Eli Lilly and Company’s (LLY - Free Report) Verzenio, to name a few.
Image: Bigstock
Pfizer's 6.9% Yield & Bullish Signal: A Prime Buying Opportunity?
Key Takeaways
Pfizer Inc.’s (PFE - Free Report) shares have faced difficulties in gaining momentum after achieving success during the COVID-19 pandemic. However, a recent strong quarterly report and a bullish technical chart suggest a possible turnaround, prompting consideration of whether it is a favorable moment to invest, particularly given its current juicy dividend yield. Let’s analyze –
Pfizer’s High-Yield Benefits Income Lovers
Currently, Pfizer’s high yield cushions investors against tariff-related woes and rising consumer prices in the United States. Pfizer’s dividend yield is approximately 6.9%, and the company has increased its dividend five times over the past five years.
At present, the payout ratio of Pfizer is 51% of earnings. This means the company is providing just over half of its net earnings to its shareholders in the form of dividends, which should entice investors who prioritize income generation. Moreover, Pfizer’s payout has grown by 2.56% over the past 5 years, indicating that the company is committed to sharing profits with shareholders and reinvesting a portion of its earnings in the business for growth.
Image Source: Zacks Investment Research
However, in the first half, Pfizer’s cash inflow was just $571 million compared to dividend payments of $4.9 billion. So, can Pfizer sustain its dividend payout? Not to worry! During the company’s second-quarter earnings call, CFO David Denton assured that Pfizer is expected to see an improvement in cash flows in the second half of the year.
However, Pfizer is facing the loss of exclusivity (LOE) of some of its best-selling drugs as generics and biosimilars erode its market share. The loss of revenues may impact dividend payments. However, CEO Albert Bourla said that such losses will be offset by recent launches of new drugs, in particular, Elrexfio and Sigvotatug vedotin, which treat multiple myeloma and non-small-cell lung cancer, respectively.
Returning to Denton, he told analysts during the second quarter conference call that Pfizer’s acquisition of Seagen will keep boosting cash flow faster than expected, giving the company more financial flexibility to sustain and increase dividend offerings in the future.
Buy Pfizer Stock Now or Adopt a Wait-and-Watch Approach?
Pfizer’s innate ability to maintain and grow dividends, along with its potential to enhance cash generation, should support research and development, solidifying its position in the competitive pharmaceutical landscape.
Pfizer’s upbeat second-quarter results have already instilled faith in the company’s growth story. Pfizer’s second-quarter sales for its COVID-19 medicine Paxlovid and vaccine Comirnaty experienced year-over-year growth. Additionally, one of its new launches, the Abrysvo vaccine, also witnessed an uptick in sales. Its cancer drugs, Xtandi and Padcev, remained the top-selling products, helping Pfizer’s revenues reach $14.7 billion in the second quarter, up 10% year over year. Adjusted earnings per share (EPS) came in at $0.78, an increase of 30% from the year-ago levels.
To top it off, a golden cross pattern emerged for Pfizer last month. Pfizer’s short-term 50-day moving average (DMA) has crossed above its long-term 200 DMA, signaling an uptrend in its share price.
Image Source: Zacks Investment Research
Thus, stakeholders should retain Pfizer stock for long-term benefits, while new investors may want to wait due to challenges in selling coronavirus products post-pandemic, patent expirations for Eliquis and Xtandi, and increasing competition in immuno-oncology. In the field of breast cancer, Pfizer’s IBRANCE is facing stiff competition from Novartis AG’s (NVS - Free Report) Kisqali and Eli Lilly and Company’s (LLY - Free Report) Verzenio, to name a few.
For now, Pfizer has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.