Pfizer (NYSE: PFE) has an attractive 6.4% dividend yield. That compares to 1% for the S&P 500 index (SNPINDEX: ^GSPC) and 1.4% for the average pharmaceutical stock. Despite the outsize yield, the company is sticking by the dividend payment. That's great, but why is the yield so high? An examination of the business through 2030 will explain the problem.
From a big picture perspective, Pfizer sells pharmaceuticals. Only the drugs it sells don't appear out of thin air. It has to develop them or buy them before it can market them. That's an expensive, often time-consuming, and difficult process. This is why drug companies are afforded a limited, patent-protected window of exclusivity to sell their drugs. Drug companies like Pfizer can generate substantial revenue from patent-protected drugs.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
There's just one small problem: revenues tend to fall dramatically after a drug loses patent protections. Complicating this is that developing new drugs doesn't follow a set timeline, unlike patent expirations. So sometimes there's a mismatch that puts pressure on a company's top and bottom lines.
That's what Pfizer is dealing with right now. In 2027, oncology drugs Ibrance and Xtandi are set to lose patent protection. In 2028, the cardiovascular drug Eliquis will lose patent protection. Pfizer is working hard to find drugs to replace revenue lost from these patent expirations, but investors are clearly worried that it won't be able to. It doesn't help any that the company suffered a material black eye when it had to drop its internally developed GLP-1 weight-loss drug candidate in 2025.
#pfizer #drug #yield
From a big picture perspective, Pfizer sells pharmaceuticals. Only the drugs it sells don't appear out of thin air. It has to develop them or buy them before it can market them. That's an expensive, often time-consuming, and difficult process. This is why drug companies are afforded a limited, patent-protected window of exclusivity to sell their drugs. Drug companies like Pfizer can generate substantial revenue from patent-protected drugs.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
There's just one small problem: revenues tend to fall dramatically after a drug loses patent protections. Complicating this is that developing new drugs doesn't follow a set timeline, unlike patent expirations. So sometimes there's a mismatch that puts pressure on a company's top and bottom lines.
That's what Pfizer is dealing with right now. In 2027, oncology drugs Ibrance and Xtandi are set to lose patent protection. In 2028, the cardiovascular drug Eliquis will lose patent protection. Pfizer is working hard to find drugs to replace revenue lost from these patent expirations, but investors are clearly worried that it won't be able to. It doesn't help any that the company suffered a material black eye when it had to drop its internally developed GLP-1 weight-loss drug candidate in 2025.
#pfizer #drug #yield
1 day ago
