Pfizer Says Its Biggest Headwinds Are Finally Easing. Does That Change the Story for This Ultra-High-Yield Dividend Stock?

The past few years have been challenging for Pfizer (NYSE: PFE). The company has faced macroeconomic problems, significantly lower sales from its coronavirus portfolio, and looming patent cliffs, including for its best-selling drug, the anticoagulant Eliquis. However, according to CEO Albert Bourla, Pfizer's headwinds are easing. Is he right?

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In his own words

At a recent conference, Bourla argued that Pfizer faced three major headwinds in 2025: tariffs and drug-pricing policies, declining sales of its coronavirus products, and patent cliffs. He goes on to argue that the pharmaceutical giant has addressed the first challenge, notably by signing agreements with the U.S. government that granted the company a tariff break in exchange for selling certain medicines at reduced prices in the country. And while COVID-related sales remain unimpressive this year, as Bourla points out, Pfizer has performed fairly well and has generally exceeded Wall Street's earnings-per-share (EPS) estimates in recent years. In fact, over the past 10 quarterly reporting periods, the drugmaker has exceeded EPS expectations in all 10 while beating revenue expectations in nine of them, according to Bourla.

This suggests that the company's coronavirus business is no longer affecting Pfizer as much as it once did. What about upcoming patent cliffs? Pfizer has significantly expanded its pipeline and lineup through internal development and acquisitions. Many new products (or acquired ones) are performing well, according to Bourla, and should allow the company to mitigate the effect of patent cliffs. These products generate revenue at an annualized rate of $13 billion and are growing their sales faster than the rest of the business. Pfizer has also significantly decreased its expenses, cutting about $7.2 billion in costs. In short, Pfizer's business has improved significantly.

More progress ahead

Still, the Eliquis patent cliff will be huge. Generics could enter the U.S. market by 2028. In the first six months of the year, Eliquis posted $4.6 billion in revenue, up 17% year over year. Ibrance, a cancer medicine, faces U.S. patent expiration in 2027. It generated $2.1 billion in revenue through June 30, up 2% compared to the year-ago period. And several other products are posting declining sales, even though they haven't yet lost patent exclusivity.

So, Pfizer will need brand-new drugs to fill the gaping holes Eliquis and Ibrance will leave behind. Thankfully, the company still has a deep pipeline of products across several therapeutic areas. Pfizer is making a particular push in oncology and should have important data readouts in the next few years. There will be clinical setbacks, but given the depth of its pipeline, Pfizer should succeed in launching at least one or two novel cancer drugs by the end of the decade.

The pharmaceutical leader is also betting big on the weight-loss market and boasts several promising products in this niche. Here too, we should expect meaningful clinical progress through the early 2030s. And in the meantime, newer and acquired products will continue posting strong sales growth, while older ones -- including Pfizer's coronavirus franchise -- should have an increasingly small impact on its financial results.

Patience may pay off

Pfizer still has some work to do. And over the next couple of years, there is a good chance its revenue will trend downward as it navigates its major patent cliffs. But the company is on the right track and could see its shares perform well over the next five years if it achieves significant clinical success. In the meantime, Pfizer should keep its dividend program intact. It has done so in recent years despite the challenges it has faced.

Pfizer's forward yield of 6.2% is significantly higher than the S&P 500's average of 1.1%, and given the improved business, it is unlikely the company will suspend or even reduce its payouts anytime soon. So, Pfizer is a solid dividend stock to consider buying now, especially for investors willing to hold the stock for the long term.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.