2 Strong Healthcare Stock Picks for Value Investors

Many healthcare companies operate in mature and stable industries with a history of profitability. This can be an incredibly attractive buying proposition for value investors looking for companies with strong balance sheets and healthy cash flows. Not all healthcare companies are alike, so it's important to take time to understand the growth opportunities and risks for a given company before you put your capital to work.

Despite generally strong fundamentals and growth potential across the industry as a whole, healthcare stocks can be overlooked or temporarily undervalued by the market. That can present opportunities for value investors to acquire shares at favorable levels. Here are two such value healthcare stocks to consider if you have cash to invest right now.

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1. Pfizer

Pfizer (NYSE: PFE) has seen its share prices flounder in the last few years as the business has moved on from its pandemic growth era and faced pending patent cliffs on some key older drugs. These factors have made the stock quite cheap compared to historical levels, and have driven its dividend yield to north of 7%. That yield is exceptionally high compared to the S&P 500 average and most of its peers in the healthcare sector.

The stock is far from a dividend trap, though. The company has a long history of paying dividends (about 86 years and counting) and has increased its dividend for 16 consecutive years. It returned $4.9 billion to shareholders through dividends in the first six months of 2025. The company has also generated free cash flow of about $16 billion over the trailing 12 months.

Pfizer has a deep and diverse research and development pipeline with over 100 drug candidates in development, 28 of which are in late-stage trials and include promising programs in oncology and immunology. This is key because the company does face impending patent cliffs on several key blockbuster drugs, with a major wave of expirations set to occur between 2026 and 2028.

The acquisition of Seagen for $43 billion in 2023 remains key to Pfizer's future growth strategy to mitigate its patent losses and move on from the pandemic era. This purchase significantly expanded its cancer drug portfolio and pipeline.

Pfizer is aiming to maximize the performance of its recently launched non-COVID products, which collectively are expected to generate approximately $20 billion in 2030 revenue. Pfizer's oncology revenue alone grew 9% in the first half of 2025. Key products like Xtandi, Lorbrena, and Padcev were major growth drivers. Pfizer also reported $28.4 billion in revenue in the first half of 2025.

Recently launched and acquired products contributed about $5 billion to Pfizer's revenue in the first half of 2025, up 15% operationally compared to the previous year. Products such as the Vyndaqel family and Nurtec are also witnessing robust uptake and demand. Pfizer has also reported positive clinical trial results for potential new cancer treatments like vepdegestrant and sasanlimab.

After a quieter period following its flurry of post-pandemic acquisitions, Pfizer looks to be in an acquisitive phase again. In September, Pfizer announced an agreement to acquire Metsera for up to $7.3 billion as it sets its sights on the lucrative GLP-1 weight loss drug market. In late October, Novo Nordisk launched an unsolicited, higher bid for Metsera worth up to $9 billion. Metsera's board determined Novo Nordisk's offer was a "superior company proposal" and gave Pfizer a window to negotiate. Pfizer filed two lawsuits against Metsera and Novo Nordisk to block the deal, and ultimately won the bid to buy Metsera for $10 billion.

Time will tell if Pfizer's GLP-1 ambitions will come to fruition. For now, Pfizer's robust financials, deeply discounted valuation, high-yielding dividend, and strategic focus on a robust product pipeline could make the healthcare stock an attractive buy-and-hold position for value investors.

2. Merck

Merck (NYSE: MRK) has also been paying a consistent dividend for decades, and has increased its dividend for 15 consecutive years and counting. Its current dividend yield is in the ballpark of 4%. Several core products, including older drugs and newer additions to Merck's portfolio, continue to drive its growth story forward.

The cancer immunotherapy Keytruda remains Merck's top revenue driver. In fact, Keytruda generated almost $29.5 billion in 2024, which made up nearly half of Merck's total sales last year. It also just garnered approval for a new subcutaneous version of the drug, Keytruda Qlex, which can extend the drug's patent lifecycle. The new formulation is a strategic move by Merck to buttress sales and extend market exclusivity beyond 2028, when key patents for the original intravenous version of Keytruda are set to expire.

Winrevair, Merck's pulmonary arterial hypertension (PAH) drug that was approved in 2024, has delivered a strong early uptake that can position it as a significant long-term revenue generator for the company. Winrevair is the first activin signaling inhibitor approved for PAH, and works by trapping activins and other proteins that contribute to the proliferation of cells in the walls of the pulmonary arteries. This helps to reduce and potentially reverse the thickening of these blood vessel walls.

Winrevair generated $976 million in sales -- just shy of the $1 billion mark -- during the first nine months of 2025. The pneumococcal conjugate vaccine Capvaxive and cancer treatment Welireg are newer products that are also bolstering Merck's growth story.

In October, Merck completed its acquisition of Verona Pharma for $10 billion. This was another move to diversify its revenue stream ahead of the patent cliff for Keytruda. The acquisition also strengthens Merck's cardiopulmonary portfolio with the addition of Verona's newly approved drug, Ohtuvayre, which is used to treat chronic obstructive pulmonary disease (COPD).

In the third quarter, Merck delivered revenue of $17.3 billion, up 4% from one year ago. Keytruda sales totaled $8.1 billion of that top line figure, up 10% from the prior-year period. Net income rose to $5.79 billion, a whopping 83% increase from one year ago.

If you're looking for a value-driven healthcare stock with a reliable dividend and plenty of growth tailwinds ahead despite its patent concerns -- a reality that all big pharmaceutical companies contend with every so often -- there's a lot to like about Merck stock.

Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.