Is This Ultra-High Yield Dividend Stock a Steal at a 19% Discount?

Key Points in This Article:

Pfizer’s (PFE) stock has fallen 19% from its 52-week high and 50% over three years due to declining COVID-19 product sales and patent cliff concerns.
Trading at 13x trailing earnings and under 8x next year’s estimates, it offers a 6.8% dividend yield.
Investors must weigh whether this valuation signals a bargain or a value trap.
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By Rich Duprey Published Aug 11, 2025 at 9:56 AM EDT

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Is This Ultra-High Yield Dividend Stock a Steal at a 19% Discount? — © Jeff J Mitchell / Getty Images News via Getty Images

A Fallen Giant

Pfizer (NYSE:PFE) has been a bitter pill for investors to swallow. Down 19% from its 52-week high of $30.43 per share, PFE stock has plummeted over 50% in the past three years, a stark contrast to the broader market’s gains.

The pharmaceutical titan, once buoyed by its COVID-19 vaccine and antiviral, has faced headwinds from declining demand for these products, looming patent expirations, and competitive pressures. The company’s struggles have left its stock trading at a seemingly bargain-basement valuation of 13 times trailing earnings and under 8 times next year’s estimates, with a forward dividend yield of 6.8%.

But is this beaten-down giant, grappling with a post-COVID hangover and pipeline uncertainties, truly a screaming buy at these levels, or is it a value trap waiting to ensnare the unwary?

Why Pfizer’s Stock Has Sagged

Pfizer’s woes stem largely from the sharp decline in its COVID-19 product portfolio. The Comirnaty vaccine and Paxlovid antiviral, which generated $37.8 billion in 2022, saw sales drop to $12.5 billion in 2024 as pandemic urgency waned.

This revenue cliff has eroded earnings, with adjusted earnings per share falling from $6.58 per share in 2022 to $3.11 per share in 2024, and 2025 Wall Street projections indicating a further 2% decline to around $3.05 per share.

Competitive pressures, particularly in the U.S. market, have also intensified, with rivals like BridgeBio’s (NASDAQ:BBIO) Attruby challenging Pfizer’s Vyndaqel, a key growth driver for transthyretin amyloidosis.

Additionally, investor sentiment has soured due to uncertainties surrounding Pfizer’s ability to replace blockbuster drugs facing patent expirations, casting a shadow over its growth prospects.

Is the Dividend Safe?

Pfizer’s 7% dividend yield is attractive for income investors, but its safety hinges on cash flow and strategic maneuvers. In 2024, Pfizer paid $7.1 billion in dividends, supported by $6.9 billion from the sale of its Haleon stake and robust cash flows from its COVID-19 products, which are expected to generate $10.5 billion in 2025. These products are expected to generate $10.5 billion in 2025 ($5.5 billion from Paxlovid and $5 billion from Comirnaty).

The company’s cost-reduction programs, targeting $4 billion in savings by 2025, further bolster its ability to maintain the $1.72 annual dividend. With a payout ratio of about 61% based on 2025 earnings estimates, the dividend appears sustainable, especially as Pfizer has raised it annually since 2009.

Management’s commitment to dividend growth, as emphasized by CFO David Denton, adds confidence, though prolonged earnings pressure could test this resolve.

Navigating Near-Term Patent Cliffs

Pfizer faces significant patent cliffs, notably for Eliquis, a blood thinner contributing 14% of revenue, set to lose U.S. exclusivity in 2028. This looming expiration threatens a key revenue stream, but Pfizer’s robust pipeline mitigates some risk.

The company secured over a dozen FDA approvals in 2024, including new indications for existing drugs and novel therapies like Adcetris and Padcev, acquired via its $43 billion Seagen deal. While Eliquis’s loss will sting, Pfizer’s diversified portfolio and new product launches provide a buffer, reducing the immediate impact of patent expirations through 2026.

Recent FDA Decisions Boosting Growth

Recent FDA approvals have strengthened Pfizer’s growth outlook. In 2024, the FDA greenlit new cancer therapies and expanded indications for drugs like Nurtec for migraine treatment. The acquisition of Seagen has added four oncology drugs to its portfolio, with Padcev showing promise in bladder cancer.

Additionally, Pfizer’s oral weight loss drug, danuglipron, is progressing through clinical trials, positioning the company to capture a share of the booming obesity market by late 2026. These developments, coupled with a pipeline of 120 programs, suggest Pfizer can offset any declines in its COVID-19 portfolio and drive revenue growth.

Key Takeaway

Pfizer’s stock, trading at a 19% discount from its 52-week high, offers a compelling opportunity for value and income investors. Its 7% dividend yield is well-supported by cash flows and asset monetization, while recent FDA approvals and a deep pipeline counterbalance near-term patent risks.

Trading at less than 8 times 2026 earnings estimates, the stock appears undervalued if Pfizer successfully implements its cost-cutting and growth initiatives. The company’s recently reported second-quarter earnings also surpassed Wall Street expectations for both revenue and profit, and Pfizer raised its full-year profit guidance.

However, risks like competitive pressures and potential earnings volatility warrant caution. For patient investors, Pfizer is a buy, with potential for a 20% upside by 2026 as new products gain traction.