In the dynamic world of investing, healthcare offers unique opportunities for those seeking substantial dividends. Although not traditionally recognized as a high-yield sector—ranking eighth among the eleven categories in the S&P 500—there are compelling stocks that stand out in this arena. Here’s a closer examination of one standout healthcare stock to consider aggressively and another that might be best avoided.
Starting with a strong recommendation, Pfizer (NYSE: PFE) has made headlines for both its substantial dividend yield and its ongoing recovery narrative. Many might find it surprising that a company with such a notable past—inclusive of a COVID-19 vaccine—has seen its stock price dip over 50% since peaking in late 2021. Despite this, 2024 has brought signs of resilience, as Pfizer reported its first year-over-year revenue growth in almost two years during the second quarter.
The impressive forward dividend yield of 5.66% signals a commitment to returning value to shareholders, and with numerous new products poised to hit the market, the future looks brighter. Pfizer’s pipeline includes promising candidates like danuglipron, a potential obesity treatment, alongside advanced cancer therapies currently undergoing late-stage trials. With a price-to-earnings ratio of just 10.5, many investors might be skeptical, but this could represent a golden opportunity for income-focused investors seeking stability in a company known for its innovation and resilient history.
Conversely, it is prudent to approach Walgreens Boots Alliance (NASDAQ: WBA) with caution. Despite boasting a formidable forward dividend yield approaching 9%, Walgreens has faced significant challenges that overshadow its potential. With its stock price plummeting approximately 80% from its three-year peak, the company’s financial performance has deteriorated sharply. An alarming 40.8% drop in adjusted earnings per share signals troubling times, especially when CEO Tim Wentworth’s comments about potential store closures underscore the issues at hand.
While Walgreens’ plan to offload around 1,200 underperforming stores may hint at a turnaround strategy, the viability of maintaining a high dividend in such a competitive landscape is questionable. The statement regarding potential adjustments to their dividend strategy further emphasizes the uncertainty. For risk-averse investors or those solely focused on income, this stock may present more risk than reward.
In summary, while Pfizer offers a compelling case for yield-seeking investors with its strong fundamentals and potential for growth, Walgreens appears to be a stock fraught with challenges that could lead to a disappointing future. As always, diligent research and careful consideration of each company’s financial health and market potential are essential for making informed investment decisions in the ever-evolving healthcare sector.