A rotation out of artificial-intelligence-driven tech names into higher-yielding, defensive healthcare stocks is gathering steam, and Pfizer (PFE) has emerged as one of the sector’s most prominent income candidates. The shares are up roughly 18% this year — on track for their best annual performance since 2021 — even though they remain about 30% below their level five years ago.
For much of the past several years, tech stocks were the market’s preferred buy, powered by the vast opportunities in artificial intelligence. With interest rates moving higher, however, investors have begun to reconsider the sector. Over the past few trading sessions, a notable shift has appeared from tech into healthcare, a move visible in the technology-sector ETF XLK. The sample is small, and whether it marks the start of a lasting trend remains to be seen, but the logic behind it is clear: investors are pivoting toward safer stocks that pay high yields. Healthcare offers a deep pool of such names, and Pfizer ranks among the most generous dividend payers in the group.
After years of being largely forgotten by the market — despite strong fundamentals and an attractive valuation — Pfizer has recently begun to recover. Its roughly 18% year-to-date gain would make 2026 its strongest year since 2021, when the drugmaker rallied more than 60% on surging revenue from its COVID vaccine and oral pill. The stock has outperformed the S&P 500 by more than four percentage points this year and has climbed about 19% over the past 52 weeks, though the five-year picture still shows a decline of around 30%.
The dividend sits at the center of the case. Last week, Pfizer declared a fourth-quarter payout of $0.43 per share, its 352nd consecutive quarterly dividend; the forward annual dividend of $1.72 per share equates to a yield of about 5.9%. That compares with an average S&P 500 yield of roughly 1%, making Pfizer’s payout more than five times the index norm. The company did cut its dividend in half during the 2009 financial crisis, but has raised it every year since 2010, and management has reiterated a commitment to maintain — and, over the longer term, grow — the payout as part of its capital-allocation strategy.
Valuation looks mixed at first glance. On a trailing basis, the stock trades at a rich 37 times earnings, but that multiple is inflated by restructuring charges, impairment costs and other nonrecurring items that have weighed on reported profit. On a forward basis, based on analysts’ expected earnings over the coming year, the P/E sits at roughly 10 — a cleaner measure once the financial noise is stripped out. Even so, long-term growth questions remain, and the stock is still viewed as deeply undervalued and deserving of a higher multiple.
Like many drugmakers, Pfizer faces a meaningful patent cliff. Its blood thinner Eliquis and autoimmune drug Xeljanz lose U.S. exclusivity this year, while breast-cancer medicine Ibrance and prostate-cancer drug Xtandi come off patent next year, forcing the company to keep filling its pipeline with new drugs — an effort weighted heavily toward oncology, with development programs expanding across breast, prostate, bladder and lung cancers. Until those products reach the market, the existing portfolio is expected to keep revenue and cash flow healthy: migraine drug Nurtec grew 18% in the second quarter, while oncology medicines Lorbrena and Padcev rose 37% and 23%, respectively. Free cash flow over the past four quarters totaled about $11 billion, more than $1 billion above the dividend payout.
The rotation into healthcare, a near-6% yield and a roughly 10-times forward multiple are the bullish ingredients in place today. Whether the stock can sustain them, however, hinges on replacing patent-cliff products with pipeline winners — the premise still awaiting proof.
