Mailbag: A Follow-Up on Pfizer and Other Questions

Two weeks ago, I said that one of my favorite stocks right now is Pfizer (PFE).

The pharmaceutical giant is in the middle of a transformational period with the goal to return to growth by 2029. It’s navigating through a patent cliff for its blood thinner drug Eliquis and the drop-off of COVID-related revenues.

Pfizer is focused on building a pipeline of new drugs that will offset these lost revenues. It’s also shoring up the balance sheet through cost savings. That included keeping its dividend flat over the last year, which was the right decision.

This leads to reader John who asked me to comment on PFE’s dividend payout ratio.

The company kicked off 2026 with a strong earnings quarter that exceeded expectations. Diluted EPS was $0.47 and adjusted diluted EPS was $0.75. The discrepancy here is the amortization of acquired intangibles and acquisition costs from the Seagen and Metsera deals. 

PFE’s quarterly dividend payment is $0.43. That makes its payout ratio 91% or 57% depending on which figure you use. Management’s long-term goal is a payout ratio of 60% of adjusted diluted EPS, which is on par with the current payout.  

This is why keeping the dividend flat was so important. It was an action that really supported what management said—keep the payout ratio at the goal to support efforts to shore up the balance sheet by controlling costs.

I think we’ll be able to collect this dividend for many years to come, and I’m happy with the progress of PFE’s planned transitional period.

How About Tax-Free, High-Yield ETFs?

Earlier this month, I mentioned looking at high-yield bond ETFs. I generally don’t look at ETFs because I like picking my own stocks.

But bonds can get tricky and have higher par values, so buying a basket of bonds can be a lot easier. I was focused on high-yield corporate bonds or junk bonds. The question I got was about tax-free options.

The tax-free requirement limits our search to municipal bonds. Adding high-yield means looking for those that are lower-rated. There are some funds out there with yields between 4.5% and 6% that fit the bill.

Keep in mind that tax-free applies at the federal level. You may still have to pay state tax. And some funds could expose you to the alternative minimum tax depending on your individual situation.

You should always consult your tax professional before assuming an invest is 100% tax-free.

Personally, I don’t go for muni bonds because I don’t want to loan money to government agencies at any level. I am happy with the junk bond funds I found with higher yields of 6.5-7.1%.

If you want tax-free, you’re looking for muni funds. Be sure to check that the top holdings meet the fund’s stated objective.

While we’re talking about investments I personally don’t care for, I was also asked for my thoughts on AGNC Investment (AGNC) and Annaly Capital Management (NLY). 

AGNC and NLY are mortgage REITs, or mREITs. They don’t own physical real estate, and instead own portfolios of agency mortgage-backed securities. This makes it an interest rate spread investment and not a real estate investment, which just isn’t my cup of tea.

Two Stocks I’ll Keep Watching

Different stocks appeal to different investors. We won’t agree on every stock, and that’s one reason why I like to keep the conversation going. Another reason is that sometimes you bring stocks to my attention that I would otherwise skip over.

One of those is Gladstone Land (LAND), a REIT focused on farmland. It currently pays $0.0467 monthly for a current yield of 5.8%. The company has historically owned farmland which it then leased to farm operators, but it’s hit quite a few headwinds recently.

What’s really interesting here is how it has restructured its lease deals. It’s been moving away from fixed rent and more heavily toward revenue sharing from crop production. As an investor, I don’t like the increased uncertainty that comes with a variable rent structure, but it just might work.

For the first quarter, fixed base rents declined $2.4 million but was offset by a $4.4 million increase in participation rents (the new crop share arrangements). Overall, AFFO rose 33% year over year.

LAND is also pivoting to alternative revenue streams for its wholly or partially vacant farms. These include solar energy and water rights leases.

There are some red flags. One method LAND uses to deleverage the balance sheet is to issue more common shares. A little digging showed that the company has a history of diluting shares when the stock is already beaten down. And being in a transitional period, we can’t expect a dividend increase any time soon.

But even though I’m not convinced right now, I’m definitely adding LAND to my watchlist.

Another interesting fund is Virtus InfraCap U.S. Preferred Stock ETF (PFFA). The fund’s objective is to seek income through a portfolio of preferred securities issued by US companies with market caps over $100 million. It currently pays $0.1725 monthly for a current yield of 9.75%.

Being a fund, you know I’m going to look at its top holdings and expense ratio. PFFA’s top holdings include Oracle Corp. Flagstone Bank, Energy Transfer, and Global Net Lease Inc. I recognized all the companies and appreciated that the top holdings covered many different sectors.  

The expense ratio is also a red flag at 2.11%. My target expense ratio for a fund is closer to 1%. s

I generally consider owning preferred stocks as a more boring, long-term strategy, but PFFA is clearly actively managed. It could be worth the trade-off to collect such a high yield. PFFA warrants a spot on my watchlist.

For more income, now and in the future,

Kelly Green