This Healthcare Stock With 6%-Plus Yield: Is the Dividend Safe?

Pfizer (NYSE: PFE) is facing patent expirations for some of its biggest drugs. That's normal for a pharmaceutical company, but Pfizer doesn't appear to have any major new drugs to replace those losing patent protection. The big hit is likely to come from cardiology drugs Eliquis and Vyndaqel, which lose patent protections in 2028.

Those upcoming patent expirations are a major reason Wall Street is so downbeat on Pfizer's stock today. But that could be an opportunity for long-term dividend investors who don't mind taking on a little extra risk for a lot of extra yield.

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Pfizer's yield is huge and looks reasonably safe

One of the big problems for pharmaceutical companies is that patent expirations happen on a set schedule, but drug development doesn't. So there can be a mismatch between the revenue lost during a patent expiration and the revenue from new drugs. It seems likely that Pfizer will face revenue headwinds through at least 2028 before it starts to grow its business again.

The story gets even more troubling when you consider that the payout ratio is well over 100%, sitting at 130% at the end of the first quarter of 2026. There's a good reason for investors to be worried about Pfizer's lofty 6.6% yield. However, dividends are paid out of cash flow, not earnings.

So Pfizer can use debt or cash on its balance sheet to support the dividend until its earnings improve. Notably, the cash dividend payout ratio, which compares the dividend to cash flow, is hovering around 100%. The financial impact of dividends appears on the cash flow statement, so this metric may be a better gauge of a company's true dividend-paying ability. While 100% is still high, it is clear that Pfizer can continue to comfortably support the dividend.

But it is important to consider that 6.6% yield from a broader perspective. The S&P 500 index (SNPINDEX: ^GSPC) is yielding just 1.1% right now. The average pharmaceutical stock's yield is 1.7%. And the average healthcare stock's yield is 1.7%. Pfizer's yield is six times that of the S&P 500 and over three times larger than that of other healthcare companies, including drug makers. The added risk doesn't seem quite as large as the yield difference.

Pfizer's board has the final call

Still, Pfizer's board of directors will make the final dividend decision. If it wants to keep paying a dividend and the company has the financial capacity to do it, as appears to be the case, then the dividend will continue to be paid. Management is telegraphing that this is the board's position, specifically stating that the company's goal is to support the dividend. It is unlikely that the CEO would say such a thing if the board were leaning toward a dividend cut.

From a long-term perspective, meanwhile, Pfizer is one of the most dominant healthcare companies on the planet. It has an over 100-year history of success behind it. It seems highly unlikely that the current headwinds, which are fairly normal in the drug sector, will permanently derail Pfizer.

Pfizer: A good risk/reward balance

For more aggressive dividend investors, this high-yield pharma giant's stock is probably worth the risk. The worst-case scenario is that the dividend is cut. But if history is any guide, the dividend won't be eliminated, and it will start growing again fairly quickly. That said, the last time the dividend was cut, the stock rose with the dividend when dividend increases resumed the quarter after the cut. If the dividend survives, meanwhile, you get a huge yield and the opportunity for price appreciation. In other words, downside risk seems fairly low if you are a long-term investor, while the upside could be very attractive.

Reuben Gregg Brewer 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.