Will Pfizer’s 5.6% Dividend Survive 2028?
Pfizer raised its outlook, the stock is near its yearly high, and a 5.6% yield is tempting. But most of the surprise came from a drug nearing the end of its patent protection, and the new CFO named capital markets among the sources of funding for the dividend.
Key points
Pfizer beat estimates and raised its outlook, but a single drug from 2012 delivered most of the surprise
The dividend consumed 83% of operating cash flow over nine months, and share buybacks have completely stalled this year
The new CFO named access to capital markets among the sources of funding for the dividend
The stock trades above the average target of 40 analysts and at a forward P/E of 10.4 versus 21.8 for the industry
The first approval for a new generation of drugs is expected in the same year generic competition arrives
The best quarter in a long time has one main sponsor
Pfizer $PFE reported third-quarter revenue of 16.6 billion USD, about 700 million more than the market expected, and adjusted earnings of 0.87 USD per share, 14 cents above consensus. The company also raised its full-year outlook to 62–64 billion USD in revenue and 2.95–3.05 USD in earnings per share. For a company that has spent the past three years mostly explaining why its revenue has been falling after COVID, that’s welcome news.
The market took note without much enthusiasm. The stock edged down on the day results were announced, then gained 2.6% the following day to 30.79 USD, stopping just short of its 52-week high of 31.06 USD. It has gained 25% over the past twelve months, while the S&P 500 index is up about 13%. Investors holding the stock for its dividend may feel the worst is behind them.
But a breakdown of revenue shows where the performance came from. Blood thinner Eliquis added 513 million USD year over year, or 25%, and Pfizer itself says the main driver was a higher net price in the US, not new patients. Cancer drug Padcev added 255 million USD. On the other hand, Comirnaty vaccine sales fell 29% and Paxlovid sales dropped 63%. Without one older drug benefiting from better pricing, there would have been virtually no surprise.