Should You Consider Selling This High-Yield Dividend Stock Being Sold by Cathie Wood?

Should You Consider Selling This High-Yield Dividend Stock Being Sold by Cathie Wood?

Cathie Wood and high dividend yields go hand in hand…well, it’s hard to finish that sentence because they don’t go together at all. Wood and his Ark Invest funds are known for investing in innovative growth stocks, not stocks with exceptionally attractive dividends.

But Pfizer (NYSE:PFE) stood out as an exception to the rule. Wood initiated a position for her in the major drugmaker Ark Genomic Innovation ETF in 2021. It has, however, sold these high-yielding dividend stocks in recent months. Should we also sell Pfizer?

Farewell, Pfizer

At the end of 2023, Wood’s Ark Genomic Innovation ETF held nearly 500,000 shares of Pfizer. Just 16 days later, the stake was significantly reduced after Wood sold more than 337,000 shares. Other sales would follow shortly.

During the first five days of March, the Ark Genomic Innovation ETF sold nearly 113,000 Pfizer shares. Over the next week, sales continued.

Today, the Ark Genomic Innovation ETF does not list Pfizer among its more than 40 holdings. After holding the big pharma title for more than two years, Wood appears to have bid farewell to Pfizer.

Why does Wood no longer like Pfizer?

These moves beg the question: Why does Wood no longer like Pfizer? An answer can be found simply by looking at the company’s stock chart since it first purchased shares in the third quarter of 2021.

Should You Consider Selling This High-Yield Dividend Stock Being Sold by Cathie Wood?

PFE Chart

However, stocks aren’t performing as dismal as Pfizer’s, for no reason. There are two underlying causes for the sharp fall in big pharma stocks.

First, sales of Pfizer’s COVID-19 vaccine Comirnaty and oral antiviral treatment Paxlovid fell. Demand for these products declined sharply as the world entered a post-pandemic phase. In the United States, the transition of vaccine funding from the federal government to a private market has also impacted sales.

Second, Pfizer will face a significant drop in patents over the next few years. Top-selling drugs including Eliquis, Ibrance, Inlyta, Xeljanz, Xtandi and Vyndaqel will lose key patents between 2025 and 2027.

Wood was almost certainly fully aware of Pfizer’s impending patent expiration when she first bought the stock. However, she might not have anticipated the sharp decline in sales linked to COVID-19. Wood may also have been betting that Pfizer would become a big winner in the obesity market. In June 2023, however, the company threw in the towel on development of lotiglipron, a once-daily diet pill. In December, Pfizer halted development of its twice-daily version of the obesity drug danuglipron.

Sell ​​Pfizer too?

Should others sell Pfizer stock like Wood did? Every investor has different goals. Maybe Pfizer no longer fits some wallets. However, I think holding Pfizer and even buying more shares is smarter than selling for most investors.

that of Pfizer dividend yield currently exceeds 6.1%. The company doesn’t need to generate strong share price growth to provide investors with attractive total returns with this juicy dividend. And the dividend appears to be sustainable at current levels.

I also expect Pfizer’s stock price to rise significantly over the next few years. Its price is already reduced. The company’s new products and new indications for existing products are expected to generate more than enough incremental revenue to offset the next patent breach. Pfizer’s business development deals, including the recent acquisition of Seagen, are expected to generate an additional $25 billion in new annual revenue by 2030.

Wood’s decision to bid farewell to Pfizer could be the best move for Ark Invest. However, most other investors will likely do well in the long term by purchasing high-yielding dividend stocks at their current valuations.

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Keith Speights holds positions at Pfizer. The Motley Fool holds positions at and recommends Pfizer. The Motley Fool has a disclosure policy.

Cathie Wood is selling this high-yielding dividend stock. Should you? was originally published by The Motley Fool

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