Opinion: Pfizer's Dividend Is Riskier Than You Might Think

It's hard not to love high dividend yields. Who doesn't want more dividends for their money? Pfizer (NYSE: PFE) and its current yield of 7% will certainly grab your attention.

But remember that the company sets the dividend amount, and the market sets the stock's yield. A yield as high as Pfizer's can be a warning that Wall Street sees problems and trades the stock at a price that reflects those risks.

The problem for investors is that it's difficult to see any obvious red flags in Pfizer's dividend -- right now. Here's why it's far riskier than it might look.

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Pfizer's dividend looks and sounds safe, on the surface

Wall Street analysts estimate that the pharmaceutical giant will earn approximately $2.99 per share this year. That's good news. Pfizer pays out $1.72 in dividends, so, at least based on earnings, the payout ratio is healthy at 57%. Additionally, the management team has been quite vocal about the dividend. Pfizer noted that preserving and supporting its dividend is a priority as recently as its first-quarter 2026 earnings call in May.

That will resonate with investors. The company benefited from selling COVID-19 vaccines and treatments in the early years of the pandemic, but has struggled since then as that windfall dried up. Pfizer's dividend, especially at a 7% yield, genuinely moves the needle for investors who might be sitting on some unrealized capital losses. The stock is still 60% below its 2022 high.

Unfortunately, there are risks now and on the horizon

Pfizer is facing the dreaded patent cliff over the next few years, when patents on some key products expire; these include Eliquis, its top seller in 2025, with roughly $8 billion in sales. Its COVID-related products Comirnaty and Paxlovid, combined, generated $6.7 billion in sales last year but continue to decline sharply. Industry analysts estimate that Pfizer could lose $17 billion in revenue from its existing portfolio by 2030.

The company is working to plug that hole with new drugs from its pipeline, but Pfizer's financial profile could dramatically shift soon. On top of that, the company didn't earn enough cash flow to cover its dividends in 2025, falling approximately $700 million short. Dividends are a cash expense, so that's a red flag, regardless of what earnings based on generally accepted accounting principles (GAAP) say.

What should investors do?

Pfizer seems committed to the dividend for now. The company has $13 billion in cash on hand, so dipping into that last year to cover its payouts isn't the end of the world. However, it's difficult to place much confidence in the dividend from one quarter to the next, because the cash payout ratio is tight and uncertainty about the next few years looms over Pfizer's business.

If you're buying Pfizer stock for its dividend, you'll want to weigh these risks, because the dividend isn't as ironclad as it looks.

Justin Pope 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.