Pfizer's Dividend Backed by Strong Free Cash Flow

Pfizer Inc. (NYSE:PFE) is one of the Best Dividend Leaders to Buy Now.

The company’s strategy focuses on steadily increasing its dividend, reinvesting in the business with strong financial returns, and carrying out value-driven share buybacks. In the first quarter, it returned $2.4 billion to shareholders through dividends.

Pfizer Inc. (NYSE:PFE)’s cash flow remains strong enough to support these payouts. In 2024, the company generated $12.7 billion in operating cash flow, up from $8.7 billion in 2023. Free cash flow also rose to $9.8 billion in 2024, compared to $4.8 billion in 2022.

That said, Pfizer Inc. (NYSE:PFE) has a five-year average payout ratio above 101%, which may seem alarming at first. A company can’t consistently pay more in dividends than it earns. After generating $9.8 billion in free cash flow in 2024, the company paid out around $9.5 billion in dividends, leaving it with a narrow margin.

However, its free cash flow is still enough to cover the dividend. Looking ahead, Pfizer Inc. (NYSE:PFE) plans to achieve $7.2 billion in cost savings by 2027, which should improve cash flow and provide more flexibility for sustaining its dividend. The company offers a quarterly dividend of $0.43 per share and has a dividend yield of 7.16%, as of June 23. It has raised its payouts for 15 years straight.

While we acknowledge the potential of PFE as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure. None.