As the COVID-19 pandemic becomes an increasingly distant memory for most investors, Pfizer (PFE -0.73%) is struggling to overcome record vaccine sales and profits in 2021 and 2022. The stock has fallen about 53% from its all-time high as the market wonders if the pharmaceutical giant can find its next blockbuster drug.

The good news is that the company’s recent results showed a recovery in growth. Sales momentum from several new product launches supports an improving outlook. Could Pfizer stock – which currently has a compelling dividend yield of 5.8% – be a good addition to your portfolio now? Here’s what you need to know.

A solid start to 2024

The challenge for Pfizer right now is to restore investor confidence and prove that the company’s long-term strategy is back on track. Fortunately, the second quarter results (for the period ended June 30) have worked in that direction. Sales growth was positive, up 3% year-on-year, but excluding the impact of the declining COVID-19 programs Comirnaty and Paxlovid, it was an impressive 14%.

In addition to contributions from Seagen, which Pfizer acquired in late 2023, growth this quarter was driven by strong demand for flagship products such as Vyndaqel and Eliquis. Sales of Nurtec, an acute migraine medication, also increased.

A major theme for Pfizer has been its efforts to achieve financial efficiency through cost adjustment, with at least $4 billion in savings expected by the end of the year. It appears that the efforts are paying off. Second-quarter adjusted earnings per share (EPS) came in at $0.60, $0.14 above the average Wall Street estimate.

This allowed management to raise its full-year guidance: Pfizer now expects adjusted earnings per share in the range of $2.45 to $2.65 for 2024, up from a previous estimate of $2.25. Revenue guidance was also raised to a range of $59.5 billion to $62.5 billion, a 4% increase from 2023.

Image source: Getty Images.

Pfizer’s attractive, high-yield dividend

The market usually rewards a turnaround, and Pfizer has all the ingredients to emerge stronger after a few difficult years. The stock’s appeal as an investment opportunity begins with its industry leadership and recognized history of innovation.

What I like about Pfizer is its compelling value, with a price-to-earnings (P/E) ratio of just 11 times management’s 2024 EPS forecast. Pfizer also offers one of the highest dividend yields among a peer group of global drugmakers – currently 5.8%, based on the quarterly payout of $0.42 per share. This level is well above names like AbbVie with a yield of 3.3%, GSK at 3.8% or even Bristol-Myers Squibb at 5.1%.

PFE dividend yield data by YCharts.

The conclusion on Pfizer shares

The second quarter earnings report shows that the company is finally emerging from its volatile post-pandemic phase. I believe Pfizer shares deserve a Buy rating.

Several drug programs awaiting clinical trial results are expected by the end of this year, covering weight management, oncology and hematology. These therapeutic candidates could be catalysts for the stock to rise. At the same time, these regulatory decisions are also risks to consider, as any setback in Pfizer’s pipeline is likely to increase the stock’s volatility.

Ultimately, Pfizer appears undervalued when considering the long-term opportunities in its existing portfolio and drug pipeline. The company’s ability to return to a profitable growth trajectory should have a positive impact on the stock. For investors with a long-term investment horizon, Pfizer could be a good choice as part of a diversified portfolio.