Why I Just Bought More of This Beaten-Down 7%-Yielding Dividend Stock

Pick a time frame -- year to date, last 12 months, last three years, last five years, or last 10 years. Regardless of which you choose, Pfizer's (NYSE: PFE) share price has declined during the period.

This might seem like the kind of stock you'd want to avoid. However, I have a different perspective about Pfizer. Here are three reasons why I just bought more of this beaten-down stock.

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1. The negatives are fully baked into Pfizer's share price

Pfizer's dismal stock performance in recent years underscores the challenges the big drugmaker faces. The company's COVID-19 product sales have declined sharply from their peak at the height of the pandemic. Just how much have sales fallen? Last year, Pfizer's COVID-19 vaccine Comirnaty generated sales of $5.35 billion. In 2022, the total was $37.8 billion.

The pharmaceutical giant must also navigate a precarious patent cliff. Between now and 2028, Pfizer will lose patent exclusivity for Inlyta, Xeljanz, Prevnar 13, Eliquis, Ibrance, Mektovi, Xtandi, and Vyndaqel. Five of those eight products were blockbusters last year. Inlyta also came very close to making the club with sales of $978 million.

Pfizer has experienced disappointing product and pipeline setbacks as well. It withdrew sickle cell disease therapy Oxbryta from the market last year after concluding that the benefits no longer outweighed the risks of the drug. The company scrapped the development of oral obesity pill danuglipron in April 2025 because of a safety concern.

But Pfizer stock trades at only 8.4 times forward earnings. I believe these negatives are fully baked into the drugmaker's share price.

2. Pfizer's positives aren't fully reflected in its valuation

You might think Wall Street would be overwhelmingly bearish about Pfizer in light of its challenges. However, that isn't the case. The average 12-month price target for Pfizer reflects an upside potential of 19%. Only one of the 25 analysts surveyed by LSEG in June rated the stock as an "underperform." All the others either recommended buying or holding Pfizer.

Why isn't Wall Street staying away from Pfizer with a 10-foot pole? I think it's because analysts recognize that the company's positives aren't fully reflected in its valuation. For example, Pfizer's efforts to increase operational efficiencies are translating to solid earnings growth. The big drugmaker expects $7.2 billion in total net cost savings by the end of 2027.

Pfizer's pipeline includes 108 programs, 30 of which are in late-stage development. The company expects 4 regulatory decisions this year and is on track to report results from nine phase 3 clinical studies.

Want proof that Wall Street doesn't think Pfizer's positives are fully reflected in its valuation? Look at the stock's price-to-earnings-to-growth (PEG) ratio based on LSEG's surveys of analysts' five-year earnings growth projections. Pfizer's PEG ratio is a super-low 0.62, indicating a highly attractive valuation factoring in the company's growth prospects.

Image source: Getty Images.

3. I'll get paid nicely to wait

My final reason for buying more Pfizer stock is that I'll get paid nicely to wait and see if the drugmaker lives up to Wall Street's growth outlook. Pfizer's forward dividend yield currently stands at 7%. Its share price won't have to rise much for me to enjoy a double-digit total return.

Is Pfizer's dividend sustainable, though? I think so. The company generates enough free cash flow to cover its dividend. Its cost-cutting initiatives should provide more financial flexibility. Pfizer's management also frequently reiterates its intention to maintain and grow the dividend.

Maybe my contrarian bet on Pfizer will pay off as I hope. Even if it doesn't, the drugmaker's juicy dividends should cushion my downside exposure.

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