Is Pfizer (NYSE:PFE) a High-Yielding Dividend Stock Worth Buying?
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In life, there’s a common expression that also carries over into the dividend investing world: If it seems too good to be true, it usually is too good to be true. Oftentimes, dividend stocks with 6% or higher yields are yield traps. This means that the dividend income they provide to shareholders seems great, but it isn’t sustainable. Now and then, though, I stumble across high-yielding dividend stocks that aren’t yield traps. I believe that one such example is Pfizer (PFE).
Interestingly, Pfizer’s 5.9% dividend yield is more than quadruple the 1.3% yield of the S&P 500 index (SPX). Despite the high yield, here is why I think the well-known healthcare stock is an income stock that warrants a Buy rating after its third-quarter earnings results.
Pfizer Put Up an Excellent Third Quarter
On October 29th, Pfizer released its third-quarter financial results. The firm’s total revenue jumped 31.2% over the year-ago period to $17.7 billion, which topped the analyst consensus by $2.8 billion. Rising COVID-19 infections in the summer and early fall led to an uptick in demand for antiviral COVID-19 treatment, Paxlovid, according to CEO Albert Bourla. That mainly was what drove the 43.6% year-over-year spike in Primary Care segment revenue to nearly $9.1 billion in the third quarter.
In addition, Pfizer’s Oncology segment posted $4 billion in revenue, which was up 29.8% over the year-ago period. This was due to ongoing momentum from advanced prostate cancer treatment Xtandi and the recent launches of advanced bladder cancer therapy Padcev and lymphoma therapy Adcetris. The company’s Specialty Care segment reported $4.3 billion in revenue during the quarter, which was equivalent to a 14% year-over-year growth rate. That was made possible by the expansion of the healthcare provider base for the Vyndaqel rare heart disease medication family.
Pfizer also posted $1.06 in adjusted diluted EPS for the third quarter, which was comfortably ahead of the analyst consensus of $0.61. These results were fueled by topline performance as well as by improvements in operating structure and favorable tax rates. On the first point, ongoing cost reductions have improved the company’s profitability. That’s how adjusted diluted EPS growth significantly outpaced revenue growth in the quarter.
A Brighter Future Is Ahead
After coming down from its COVID-19 pandemic high, Pfizer looks like it is firmly on the road to recovery, which adds to my bullish outlook. The company expects to realize $4 billion of its $5.5 billion-plus in annual targeted savings in 2024. That’s thanks to its cost realignment program launched last October. The other $1.5 billion-plus in anticipated annual savings are expected to materialize by the end of 2027 from the first phase of the manufacturing optimization program.
