Buying an oversold stock can be a good contrarian bet for investors to make, especially if the business' fundamentals remain sound. One stock that income investors should be considering right now is healthcare giant Pfizer (NYSE:PFE).
Shares of the company have been falling this year and are down 27% since January. Dwindling demand for the company's COVID-19 vaccine and pill have made investors bearish on Pfizer's future. However, the company has been working on developing its pipeline through acquisitions, with its announcement to buy cancer company Seagen (NASDAQ:SGEN) for $43 billion being its most notable transaction in recent years. Pfizer may have a challenging road ahead to make up for lost COVID revenue but its strong resources should enable it to do well.
What's positive is that the company has a huge buffer between its free cash flow and its dividend. Last year, free cash flow totaled $26 billion, which was close to three times the $8.9 billion it paid out in dividends. That suggest even if free cash flow slows down amid a drop in business this year, Pfizer could still be in great shape to be able to continue to make payments. That means its 4.3% dividend yield could remain safe, and that may make the stock an underrated buy.
Pfizer's underrated growth prospects and its high-yielding dividend make this a stock that could be suitable for any type of investor, as you could potentially benefit from a rising share price as well as a strong recurring payout.
