Is Pfizer's 6.8%-Yielding Dividend Too Good to Be True?

Core Viewpoint - Pfizer offers a high dividend yield of 6.8%, significantly above the S&P 500 average of 1.2%, raising questions about the sustainability of this yield given its high payout ratio of around 90% [2][4]. Financial Metrics - Pfizer's payout ratio is approximately 90%, indicating a potential risk to dividend sustainability [4]. - The company's free cash flow for the trailing 12 months was $12.4 billion, exceeding the $9.6 billion paid out in dividends, suggesting the dividend is safe [6]. - In the most recent quarter, Pfizer reported revenue growth of 10% year-over-year, with sales reaching $14.7 billion and diluted earnings per share of $0.51, which is higher than the quarterly dividend payment of $0.43 [9]. Strategic Developments - Pfizer is actively working to reduce costs while expanding operations, including a significant $43 billion acquisition of oncology company Seagen in 2023, which is expected to create new opportunities [8]. - The company is adapting to declining demand for its COVID-19 vaccine and pill while continuing to focus on cost reduction [9]. Market Position - Despite a 5% decline in stock price year-to-date, Pfizer's financials do not indicate any immediate concerns regarding its dividend [7][10]. - The stock is currently trading at a price-to-earnings multiple of 13, suggesting it is relatively cheap compared to its earnings potential [10].