To The Moon

$Pfizer(PFE)$

Pfizer (NYSE: PFE) has been a frustrating stock for long-term investors. Once celebrated for its blockbuster drugs and massive COVID-19 vaccine revenues, the company has struggled to maintain momentum in the years since. The share price has languished, down nearly 30% over the last five years, underperforming both the broader market and sector peers. For investors who expected Pfizer to ride its pandemic windfall into a new era of growth, the results have been disappointing.

Yet beneath the sluggish stock chart lies a more nuanced story. Pfizer’s fundamentals have been stabilizing, its pipeline is beginning to deliver, and most importantly, the stock now offers a jaw-dropping 7% dividend yield—at a time when interest rates are expected to fall. For income investors, that’s a headline figure that’s hard to ignore. But as with any dividend play, the big question is: is it sustainable?

In this article, we’ll break down Pfizer’s performance, growth outlook, dividend safety, valuation, risks, and ultimately, whether the stock deserves a spot in long-term portfolios.

Performance Overview: A Lost Half-Decade

Pfizer’s stock performance since 2020 is a tale of missed opportunities. At the height of the pandemic, the company briefly looked like a market darling, fueled by record-breaking vaccine sales. But those revenues were one-off in nature, and as vaccine demand waned, so did Pfizer’s growth story.

• 5-Year Performance: Down 29%, compared to a 70% gain in the S&P 500.

• YTD (2025): Largely flat, trailing both healthcare peers and the broader market.

• Dividend Yield: Currently 7%, one of the highest among large-cap pharmaceuticals.

While competitors like Eli Lilly (LLY) and Novo Nordisk (NVO) have soared on the back of their obesity and diabetes drug pipelines, Pfizer has lagged behind, weighed down by slowing COVID revenues, a heavy debt load from acquisitions, and investor skepticism around execution.

But this underperformance has a flip side: it has left Pfizer cheap. Very cheap.

Fundamentals: Strong Quarter, Signs of Stability

The company’s most recent quarterly report painted a much brighter picture than its long-term chart would suggest.

• EPS: $0.78 vs. $0.58 expected – a significant earnings beat.

• Revenue: Also above expectations, with broad-based strength.

• Oncology: Grew 11% year-over-year, powered by the Seagen acquisition.

• New Products/Launches: Increased 15% in revenue contribution.

• Guidance: EPS raised from $3.00 to $3.10, revenue outlook also lifted.

The oncology segment deserves special mention. With the acquisition of Seagen, Pfizer has bolstered its position in one of the most promising and lucrative therapeutic areas. Synergies from the deal are beginning to materialize, and management has guided to further efficiency gains in the coming years. Oncology is projected to be a key growth driver over the next decade, and Pfizer is now firmly positioned as a top player in the field.

This was a solid quarter—one that showed Pfizer is more than just a “COVID stock.”

Why the Stock Has Struggled: The Buyback Problem

Despite strong free cash flow and an attractive valuation, Pfizer’s stock has remained stuck. A big reason is the absence of share buybacks.

At just 8x forward earnings and trading at an 11% free cash flow yield, buybacks would represent a highly accretive use of capital. Yet Pfizer hasn’t pursued them. Instead, management has focused on:

1. Dividend Payments – Maintaining and growing the dividend.

2. R&D Investment – Funding new drug development and product launches.

3. Debt Reduction – Paying down obligations from the Seagen deal.

The debt burden has been significant. Pfizer had $6 billion due in 2026, which the company has already begun to pay down. By 2027, only $980 million will remain. That deleveraging effort is critical, but it has left little room for shareholder-friendly buybacks.

The good news? As debt levels fall, Pfizer is nearing a point where buybacks can return. If management reintroduces repurchases by 2026, it could provide a meaningful catalyst for the stock, similar to what we saw with British American Tobacco (BTI) when it combined a double-digit yield with buybacks, stabilizing its stock.

Dividend Sustainability: Can Pfizer Keep Paying 7%?

This is the most pressing question for income investors. At 7%, Pfizer’s dividend looks almost too good to be true. But is it?

Let’s run the numbers:

• Dividend Yield: ~7%

• Annual Dividend Obligation: ~$10 billion

• Current Free Cash Flow (2025): $12 billion

• Projected Free Cash Flow (2027): $18–19 billion

• Payout Ratio (FCF basis): 65–68%

By these metrics, the dividend looks sustainable. Pfizer is generating enough free cash flow to cover the payout with a comfortable buffer, and that buffer should widen as efficiencies kick in.

Cost Savings and Efficiency Gains

Much of the free cash flow growth won’t come from revenue expansion, but from cost-cutting. Activist pressure exposed about $7 billion in wasteful spending, and management is targeting $7.2 billion in savings by 2027. Those savings alone could account for the projected jump in free cash flow.

This is critical. Even if revenues stagnate, Pfizer’s dividend looks safe because of internal efficiency gains. At $18 billion in projected free cash flow vs. $10 billion in dividend obligations, Pfizer will have room to cover payouts and potentially resume buybacks.

Valuation: One of the Cheapest Big Pharmas

Valuation is where Pfizer really stands out.

• Forward P/E: 8x (vs. 12–14x for peers, and vs. a historical average of ~12x for Pfizer itself).

• Free Cash Flow Yield: 11% (vs. 8–8.5% historical average).

• Dividend Yield: 7% (well above peers).

At today’s prices, Pfizer is essentially being priced as if it’s a no-growth company. That sets the stage for asymmetric returns.

Even assuming no multiple expansion, Pfizer’s 7% dividend plus ~4% in free cash flow growth suggests a baseline return potential of 11–12% annually. If the market rerates the stock back toward its historical multiple of 12x, returns could be materially higher.

Catalysts Ahead: Why Pfizer Could Bottom Soon

Several factors could serve as positive catalysts for Pfizer’s stock:

1. Debt Reduction → Buybacks: Once the balance sheet is cleaned up, buybacks could provide a strong floor for the stock.

2. Oncology Growth: Seagen integration and pipeline growth could drive revenues over the next decade.

3. Falling Rates: Lower interest rates make Pfizer’s 7% dividend even more attractive relative to bonds and savings products.

4. Valuation Expansion: A move from 8x to 12x earnings would imply significant upside.

5. Cost Savings Execution: Delivering on $7+ billion in savings could materially boost profitability.

Risks to the Thesis

Pfizer is not without risks, and investors should be mindful of several key headwinds:

• Drug Pricing Regulation: Political pressure from both Trump and the current administration to lower drug prices could weigh on revenues.

• Patent Cliff: Like BMY and Merck, Pfizer faces expiring patents in the next few years, which could erode revenue unless offset by new launches.

• COVID Overhang: The market still perceives Pfizer as a “COVID beneficiary,” and lingering skepticism continues to weigh on sentiment.

• Execution Risk: Cost savings and synergies must be delivered—any missteps could erode projected free cash flow growth.

Verdict & Entry Price Zone

Pfizer looks undervalued at current levels. The 7% dividend yield is highly attractive, especially with interest rates moving lower, and free cash flow projections suggest the payout is sustainable. Debt reduction has strengthened the balance sheet, and if buybacks return in 2026, they could provide a strong catalyst. While regulatory and patent-cliff risks remain, much of the downside appears already priced in.

• Ideal Entry Range: $22.50 – $25.50 Buying within this zone provides a margin of safety while securing the dividend yield.

• Target Price (12–18 months): $28 – $30

• Conservative Target: Around $27, in case growth or cost-savings execution lags.

For income-focused investors, Pfizer’s 7% dividend appears sustainable and highly attractive in a falling-rate environment. For value investors, the stock offers a deep discount relative to both peers and historical averages.

Final Thoughts

Pfizer has disappointed investors over the past five years, no question. But the company is not broken—its fundamentals are stabilizing, cash flow is growing, and debt is being reduced. With a 7% dividend yield, 11% free cash flow yield, and an 8x earnings multiple, Pfizer is priced for failure.

That sets up a compelling contrarian opportunity. If management executes on cost savings, delivers growth in oncology, and reintroduces buybacks by 2026, the next five years could look very different from the last five.

For long-term dividend investors willing to look past short-term noise, Pfizer offers a rare combination of income, value, and potential upside.