Key Takeaways
- Pfizer yields 6.3% and British American Tobacco 6.1%, and over the twelve months to June 2026, their dividends took 89% and 78% of free cash flow.
- Pfizer’s dividends took more than all of its free cash flow in fiscal 2023 and fiscal 2025, and its CEO has committed to maintaining the dividend until its patent losses pass.
- British American Tobacco’s dividends took 50% to 55% of its free cash flow from fiscal 2021 to fiscal 2024, then 91% in fiscal 2025.
- Pfizer carries less debt, at 2.0x net debt to EBITDA over the last twelve months against 2.9x for British American Tobacco.
Anyone hunting for a 6% yield from a big, established company is going to run into Pfizer (PFE) and British American Tobacco (BTI).
Pfizer raised its 2026 revenue guidance in August. BAT said on July 30, and again on Sept. 29, that it expects earnings per share toward the middle of its 5% to 8% range this year. Yet both dividends ate up more than 90% of free cash flow in fiscal 2025.
So which 6%-plus yield is the better one to own?
| Metric | Pfizer (PFE) | British American Tobacco (BTI) |
|---|---|---|
| Dividend yield | 6.3% | 6.1% |
| Annual dividend | $1.72 a share | $3.29 a share at today’s exchange rate (£3.34 for fiscal 2025) |
| Dividend growth, fiscal 2020 to 2025 | 2.5% a year | 2.2% a year (in pounds) |
| Cash dividend payout ratio (TTM) | 89% (to June 28, 2026) | 78% (to June 30, 2026) |
| Net debt/EBITDA (LTM) | 1.97x | 2.88x |
| Interest coverage (LTM) | 6.98x | 5.2x |
| Forward P/E (NTM) | 10.0x | 11.2x |
Pfizer’s big check is on hold
Pfizer’s sales are holding up as newer drugs replace COVID revenue. Second-quarter 2026 revenue rose 3% from the same quarter a year before, to $15.0 billion, with launched and acquired products up 18% operationally. Pfizer raised its 2026 revenue guidance by $500 million at the midpoint, to $60.5 billion to $62.5 billion.
The cash behind the dividend has been thinner since the COVID years. Free cash flow fell from $26.0 billion in fiscal 2022 to $4.79 billion in fiscal 2023, and was $9.08 billion in fiscal 2025. Dividends paid rose every year, from $8.04 billion in fiscal 2019 to $9.77 billion in fiscal 2025…
…which put the cash dividend payout ratio at 193% in fiscal 2023 and 108% in fiscal 2025. Over the twelve months to June 28, 2026, it’s a tight 89%.
Chairman and CEO Albert Bourla told analysts on Aug. 4 that “even the most stretched scenarios that we are running, we will be able to maintain our dividend.” He said growth would resume once Pfizer’s patent losses pass. Pfizer paid $0.86 a share in the first half of 2026, the same pace as fiscal 2025’s $1.72.
Those patent losses are the main risk. Pfizer expects them to weigh on revenue through 2028.
BAT had one tight year
Pfizer’s coverage has run thin since fiscal 2023, while BAT’s tightened in a single year.
BAT’s US cigarette business grew 5% in value in the first half of 2026.
From fiscal 2021 to fiscal 2024, free cash flow of £9.19 billion to £10.3 billion a year covered dividends of £4.91 billion to £5.27 billion with room to spare. Then free cash flow fell from £9.64 billion in fiscal 2024 to £5.79 billion in fiscal 2025…
…against £5.29 billion of dividends, a 91% cash dividend payout ratio. Over the twelve months to June 30, 2026, the ratio has eased to a more comfortable 78%. Management expects cash conversion above 95% again for the full year.
Chief Executive Tadeu Marroco says BAT will keep rewarding shareholders through “our progressive dividend and sustainable share buyback.”
BAT sets its dividend in pounds, £3.34 a share for fiscal 2025. The $3.29 a US holder gets at today’s exchange rate moves with the pound.
The main risk is debt. BAT’s net debt is 2.88x EBITDA over the last twelve months, against Pfizer’s 1.97x. On Sept. 29, BAT said it expects its leverage, on its own measure, to be within its 2.0x to 2.5x target by year-end.
So which dividend wins?
British American Tobacco is the better high-yield dividend stock. Its dividend has more cash behind it: 78% of free cash flow against Pfizer’s 89% over the latest twelve months. BAT is also still raising it.
That outweighs Pfizer’s slightly bigger check. Put $10,000 in Pfizer, and it pays $630 a year today, against $610 for BAT. But Pfizer is holding its dividend until its patent losses pass. If it stays at $630, BAT’s $610 passes it within two raises at BAT’s 2.2% rate (figured on its growth in pounds).
This isn’t to say Pfizer’s dividend is in danger. It yields more, carries less debt and trades at 10.0x forward earnings against BAT’s 11.2x. It’s just that BAT’s dividend has more room today, and it’s still growing.
Of course, BAT’s full-year 2026 free cash flow is the thing to watch. If it lands closer to fiscal 2025’s £5.79 billion, Pfizer’s stronger balance sheet would tip this the other way.
So what is British American Tobacco stock actually worth?
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