Pfizer's 6.5% Dividend Yield Looked Too Good to Be True -- but Management Just Silenced the Skeptics

The higher the dividend yield, the more investors tend to worry. Pfizer (NYSE: PFE) boasts a forward dividend yield of 6.5%, the highest yield among large-cap healthcare stocks. Unsurprisingly, some have viewed Pfizer as a yield trap.

While Pfizer's dividend yield may have looked too good to be true for some investors, that shouldn't be the case now. The company provided its first-quarter update on Tuesday, May 5, 2026. And I think that management just silenced the skeptics.

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Pfizer's reassuring news for income investors

Pfizer CEO Albert Bourla addressed any doubts about the drugmaker's commitment to its dividend in the Q1 call, stating, "We intend to maintain and over time, grow our dividend as we continue to delever and build long-term value." CFO David Denton reinforced this message, saying that Pfizer's strategy includes "maintaining and over time growing our dividend."

Were those just meaningless words? I don't think so. One reason is that Pfizer now has greater cash flow visibility thanks to legal settlements related to the Vyndamax patent infringement and a Belgian court ruling on Comirnaty contracts with European Union countries. These two developments significantly improve Pfizer's ability to support its dividend.

Pfizer has made large acquisitions in the past that resulted in dividend cuts. Could history repeat itself? Bourla was asked about this possibility in the Q1 earnings call. He replied that Pfizer will always explore merger and acquisition opportunities, but the company isn't planning to pursue a large-scale merger. Bourla added that the disruption of a mega merger would negatively affect the organization's execution of its artificial intelligence (AI) transformation.

The near term looks good for Pfizer. The company generated more operating cash flow in Q1 than it needed to cover the dividend. Pfizer beat Wall Street's expectations with its Q1 results. Denton hinted that the drugmaker would probably have raised its guidance were it not for his "philosophy of not really adjusting in Q1."

The longer term looks bright, too. Management now has "greater confidence" that the company will deliver high single-digit revenue growth beginning in 2029. Pfizer's pipeline programs have promising prospects, especially its cancer and obesity therapies in development.

A yield trap? No way.

Had Pfizer's Q1 update given investors reasons to worry about weak cash flow, legal questions, and uncertainty related to growth, the skeptics viewing the stock as a yield trap would have had some ammunition. However, that wasn't the case at all. Instead, we heard Pfizer discuss strong cash flow generation, key legal victories, and increased confidence in solid growth in the years ahead.

Pfizer's dividend appears to be safer than some thought before the Q1 results. The 6.5% yield isn't too good to be true. Here's what is true: Pfizer is one of the most attractive dividend stocks on the market right now.

Keith Speights has positions in Pfizer. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.