Pfizer (NYSE: PFE) has seen its better days. Shares of the big drugmaker have plunged more than 50% from the highs set in late 2021. The pharma stock is down more than 30% over the last 12 months. Sales and profits have fallen sharply.
Should investors avoid the beaten-down stock like the plague? I don’t think so. Here are five reasons why buying this 6%-yielding dividend stock could be a brilliant move.
1. COVID-19 trough
Most of Pfizer’s recent woes can be blamed on declining demand for its COVID-19 products. Sales for COVID-19 vaccine Comirnaty and oral antiviral medication Paxlovid have plummeted. However, I predict that 2024 will be a trough year for the company’s COVID-19 sales.
Pfizer’s year-over-year comparisons will be less challenging without the big inventory writedowns the company took in 2023. The drugmaker no longer is in the middle of transitioning to a private-payer market in the U.S. These two factors alone should give Pfizer a light at the end of the tunnel.
Even better, the company expects to launch a combination COVID-flu vaccine in 2025. This new product could provide a much-needed sales boost next year.
2. New products and new indications
Pfizer faces a major challenge in the coming years with patents expiring for several products. You might think that the loss of exclusivity for blockbusters such as Eliquis, Ibrance, Vyndaqel, and Xtandi would be nearly impossible to overcome. The good news for Pfizer is that it isn’t.
Sure, the company expects its patent cliff will shave roughly $17 billion off annual revenue by 2030. However, Pfizer also projects that new products and new indications for existing products launched through the first half of 2024 will add around $20 billion in annual revenue.
This isn’t just wishful thinking. Pfizer should have tremendous growth prospects for new drugs, including respiratory syncytial virus (RSV) vaccine Abrysvo, multiple myeloma drug Elrexfio, and migraine therapies Nurtec and Vydura.
3. Business development bonanza
Offsetting the lost revenue from key patent expirations plus a little extra isn’t enough to enable Pfizer to return to robust growth. However, the bonanza the company should receive from its business development activity will be.
Pfizer looks for an additional $25 billion in new annual revenue by 2030 from business development deals. Its recent acquisition of Seagen is a big step in the right direction. Seagen’s cancer drugs should add more than $3 billion in sales this year — and that number will almost certainly grow significantly by the end of the decade.
4. The price is right
Many investors seem to be focusing only on Pfizer’s current struggles and not on its promising developments around the corner. As a result, the stock’s valuation looks very attractive.
Pfizer’s shares trade at only 12.7 times forward earnings. That’s a steep discount from the S&P 500 healthcare sector’s forward-earnings multiple of 19.4 times.
5. Get paid to wait
You didn’t think I would leave out Pfizer’s juicy dividend, did you? The dividend yield of nearly 6% ranks among the best among biopharmaceutical stocks. Pfizer has increased its dividend every year since 2010. In the company’s fourth-quarter earnings conference call, CFO David Denton listed growing the dividend as the first capital-allocation priority.
It will admittedly take a few years for Pfizer’s growth strategy to unfold. But with a high dividend yield, you’ll get paid (handsomely, I might add) to wait.
Should you invest $1,000 in Pfizer right now?
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Keith Speights has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.
5 Reasons Why Buying This 6%-Yielding Dividend Stock Could Be a Brilliant Move was originally published by The Motley Fool
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