1 Beautiful S&P 500 Dividend Stock Dropped 56% to Buy and Hold Forever

By | March 4, 2024

Considering the key role it plays in the fight against COVID-19, the fact is that Pfizer (NYSE:PFE) Not entirely surprising, shares are down 56% from their 2021 peak. Demand for the COVID-19 vaccine (Comirnaty) and its treatment (Paxlovid) soared during the height of the pandemic. However, now that the coronavirus infection has decreased, turnover fell by 41% last year. Income fell by more than 70% year on year. Yes.

However, the sellers of the stock have demonstrably exceeded their target. Not only is Pfizer stock now severely undervalued, but it now also offers a large dividend yield of 6.2%.

By the way, that’s a well-funded dividend that has been increased every year for the past fifteen years.

Don’t be distracted by the short-term noise

The rapid rise and equally rapid fall of Pfizer shares is logical. The circumstances in 2020 and 2021 were unusual and even frightening. In 2022, interest in combating the COVID-19 pandemic declined faster than the pandemic itself. Investors were forced to make buying and selling decisions faster than normal.

However, the dust has finally settled. We can start making calls based on a company’s plausible long-term prospects. And Pfizer’s long-term prospects look quite attractive.

Certainly, the huge revenues of Paxlovid and Comirnaty are a thing of the past. But look ahead. This is the same pharmaceutical company behind the blood thinner Eliquis, the pneumonia vaccine Prevnar, the cancer-fighting Ibrance and Xtandi, and the arthritis drug Xeljanz, to name a few. These are all blockbuster drugs (annual sales of more than $1 billion), and they represent just a sample of Pfizer’s entire portfolio. In view of this, Pfizer’s sales in 2023, excluding COVID-19-related sales, increased by 7%.

Similar growth is also in the offing. Analysts expect revenue growth of 2.5% this year, which is expected to accelerate to a growth rate of 4.6% next year. Earnings are likely to grow even further, from $1.84 per share last year to $2.20 this year and $2.74 per share in 2025.

It sounds like a lot… and it is. But the drugmaker has been busy in recent years while also tackling the COVID-19 pandemic. Early last year, for example, Pfizer announced plans to launch 19 new drugs – or at least new indications – within the next 18 months that will generate $20 billion in annual sales by 2030. It’s also on track to reach that goal, with last year’s debut of RSV vaccine Abrysvo, the recent expansion of Elrexfio’s approval label to include multiple myeloma, and more.

By the end of this year, we expect Pfizer to begin a deeper integration of the recently acquired Seagen, strengthening the pharmaceutical giant’s oncology portfolio. The company believes the addition of Seagen’s drugs could add more than $10 billion annually to revenue by 2030.

In addition, you should know that Pfizer’s current pipeline includes 112 different studies, 31 of which are in the third and final phase of their testing, and six of which are already under review by regulators for possible approval.

This is an excellent opportunity to invest in Pfizer shares

Why isn’t all this reflected in the price of Pfizer stock? Good question. But it would be naive to ignore the dynamics arising from the COVID-19 pandemic. It put a white-hot bullish spotlight on the company. Investors weren’t sure how to value the stock as the spotlight dimmed, and they were even less sure when that light finally went out. It’s been a few years now that COVID-related products weren’t the focus of discussions about Pfizer’s results.

However, that subsequent correction appears to have finally run its full course, and then some. The shares trade at less than 15 times their current earnings, and less than 10 times next year’s expected earnings per share. Both metrics are unusually low, even for a slow-growing company like Pfizer. For perspective, the S&P500The rolling and forward-looking price-to-earnings ratios are both currently above 20. The index’s dividend yield is also a modest 1.4%, compared to Pfizer’s 6.2%.

Connect the dots: There’s a clear, values-based argument to be made for owning part of the pharmaceutical company. The argument for owning Pfizer for the long term — perhaps even forever — is even stronger.

This is a company that has been around for 175 years. The company’s executives collectively have decades of experience in the drug world. And Pfizer itself has the financial resources to develop or purchase the new products it needs to replace the outdated products. Remember, this is the same company that many investors feared would struggle to get past the expiration of its patent on the cholesterol-fighting Lipitor in 2011, and then the loss of patent protection on Viagra in 2017. Yet this is what we’re talking about. Eliquis, Elrexfio and the potential of the Seagen acquisition.

A position in Pfizer will never be as rewarding as a stake in, for example Nvidia or Amazon. The pharmaceutical sector simply isn’t developing that quickly, especially for bigger players like Pfizer.

What Pfizer lacks in speed, it more than makes up for in longevity. Right now, it’s more than making up for its slower growth rate with an incredible dividend yield. Income-seeking investors won’t want to miss this boat.

Should you invest €1,000 in Pfizer now?

Consider the following before buying shares in Pfizer:

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Amazon, Nvidia, and Pfizer. The Motley Fool has a disclosure policy.

1 Beautiful S&P 500 Dividend Stock Dropped 56% to Buy and Hold Forever originally published by The Motley Fool

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