Meet the 7% Yield Dividend Stock That Could Soar in 2026

Pfizer (NYSE: PFE) is one of the oldest and most respected pharmaceutical companies in the world. The stock is out of favor right now, trading down around 60% from its 2022 high-water mark. The steep share price decline has pushed the dividend yield up to a huge 7% or so. And management is making aggressive moves in 2025 that could set up a very strong 2026 for the stock.

What does Pfizer do?

Pfizer is a pharmaceutical company, which is a very technical business. Making drugs is also expensive, intensely competitive, and subjects the company to heavy government regulation. Worse, the innovation that drives the drug industry tends to be a bit lumpy, so business growth can come in fits and starts. However, Pfizer has proven over time that it has what it takes to excel in the industry, even if there are periods of time when its business may struggle.

The healthcare giant is struggling right now. Most notably, it is facing down sizable patent cliffs in 2027 and 2028, when oncology drug Ibrance and cardiovascular drugs Eliquis and Vyndaqel are set to lose patent protections. Drug makers are granted temporary exclusivity for new drugs given the investment needed to bring them to market, but revenue usually falls off dramatically when those patents expire (the so-called patent cliff).

On top of that, the entire drug industry is dealing with renewed pressure around prices, particularly in the U.S. market. Heightened regulatory activity risks government intervention in pricing and potential tariff changes.

All in, investors are worried about Pfizer's near-term future. The dividend, meanwhile, is also a wild card because the trailing 12-month dividend payout ratio is a lofty 90% or so. The company actually cut the dividend in 2009 when it acquired Wyeth for roughly $68 billion, so the risk of a dividend cut needs to be carefully considered.

Pfizer is making the necessary changes

Pfizer didn't get to be the industry-leading company it is by avoiding a fight. It has long taken the steps needed to ensure its long-term survival and success. It is doing so again right now, which is why the Wyeth acquisition is notable.

Given Pfizer's lack of success with its own drug pipeline, specifically in the weight loss arena, it has agreed to buy Metsera (NASDAQ: MTSR) for $47.50 per share in cash, or around $4.9 billion. That said, there's another $22.50 in per-share potential earn outs that could notably increase the price tag.

Buying Metsera strengthens Pfizer's drug pipeline and should help it to more quickly advance its efforts in the weight loss drug market. And that should help it deal with its patent cliff issues. In other words, the board of directors sees the issue and is doing what needs to be done. The deal could lead to a dividend cut, but it may not, given that the size of the Mestera deal isn't nearly as large as the Wyeth transaction. Either way, Pfizer is clearly addressing its pipeline and patent cliff headwinds as you would expect it to.

Meanwhile, on the regulatory front, Pfizer was one of the first drug makers to make a deal with the U.S. government around pricing and capital investments in the U.S. market. That should position the company well to avoid tariff issues and give it a lead position as new pricing trends take shape in the market. Again, Pfizer is doing what needs to be done to ensure its long-term survival.

There's a rebound opportunity here

It might be best to view Pfizer as a turnaround story and not a dividend story, given the lofty dividend payout ratio. However, given the deep sell-off, there could be material rebound potential in the share price in 2026 as investors become more comfortable with the moves the company is making to get its business back on track. The closing of the Metsera deal, expected to occur in the fourth quarter of 2025, could be the trigger that investors need to take a renewed, and more positive, view of this drug giant.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool has a disclosure policy.