The past year has been terrific for most stocks. The S&P 500 index rose 27.5% during the 12 months ended Aug. 26.
It’s always nice to see the value of your portfolio rise during a bull market, but it also makes it hard to find stocks to buy at reasonable valuations.
Investors seeking reliable dividend stocks that still look like bargains will be glad to know that not all of the S&P 500’s components have had a great year. Pfizer (NYSE: PFE) and Bristol Myers Squibb (NYSE: BMY) both fell more than 20% during the 12-month period that ended Aug. 26
Their prices are beaten down but both companies continue raising their dividend payouts. Now, these big pharma stocks offer high yields that income-seeking investors will find hard to ignore.
1. Bristol Myers Squibb
Bristol Myers Squibb’s stock price is down, but its dividend keeps rising. Last December, the company increased its quarterly payout for the 15th consecutive year. With its stock price in the doldrums, its dividend currently offers a juicy 5% yield.
This March, Bristol Myers Squibb completed a $14 billion acquisition of Karuna Therapeutics and its still experimental psychosis treatment, KarXT. The stock is down because the company recorded a $12.9 billion in-process research and development charge in the first quarter this year related to the acquisition.
Bristol Myers Squibb could quickly realize a return on its investment thanks to a KarXT launch that is widely expected to begin before the end of 2024. The FDA is reviewing an application that, if approved, could make it a sorely needed new option for schizophrenia patients. An approval decision is expected in September.
Unlike currently available antipsychotic drugs, KarXT doesn’t act on dopamine receptors. Its unique mode of action alleviates psychosis symptoms with fewer side effects, such as weight gain and extreme sleepiness, which make compliance a challenge. Patients and psychiatrists clamoring for a better treatment option are expected to drive annual KarXT sales past $10 billion at its peak.
Investors will be glad to know that Bristol Myers Squibb could continue pushing its needle forward even if KarXT gets held back by unforeseen issues. In the second quarter, the company reported sales growth of more than 50% year over year for five recently launched products.
In addition to KarXT, Bristol Myers Squibb’s development pipeline boasts five experimental drugs in late-stage clinical trials. With a slew of potential growth drivers on the horizon plus plenty already in commercial stages, this company could steadily raise its dividend payout for another 15 years.
2. Pfizer
Shares of Pfizer started 2024 under pressure due to the unexpected collapse of its COVID-19 products. More recently, investors have been turned off by a late-stage clinical trial failure for its mRNA-based flu and COVID-19 shot.
Pfizer’s recent problems have hurt its stock price, but they haven’t stopped the company from raising its dividend. Earlier this year, the pharmaceutical giant raised its quarterly payout for the 15th year in a row. At recent prices, the stock offers a huge 5.6% yield.
Comirnaty vaccine sales collapsed by 87% to just $195 million in the second quarter, but not before Pfizer reinvested profits from the COVID-19 vaccine into future growth drivers. For example, Pfizer acquired a cancer drug developer called Seagen for $43 billion last year.
Padcev is one of four commercial-stage drugs Pfizer picked up from Seagen, and it could justify the entire acquisition on its own. Last year it became a new treatment option for patients with advanced-stage bladder cancer following their initial diagnosis. It’s quickly become the new standard for this patient population, which drove second-quarter sales 145% higher year over year to an annualized $1.6 billion.
In addition to a leading oncology department, Pfizer is launching a new gene therapy for patients with the rare bleeding disorder hemophilia B. A single administration of the treatment now known as Beqvez in the U.S. and Durveqtix in the EU helps hemophilia B patients produce the clotting factor they lack. This allows patients to reduce or eliminate their reliance on frequent clotting factor infusions.
A gene therapy for hemophilia patients and a new standard treatment for bladder cancer aren’t the only growth drivers pushing up total sales for Pfizer. The company reported second-quarter sales that rose more than 10% this year for over a dozen products. With a diverse product lineup, investors can look forward to steady dividend growth from this stock for many years to come.
Should you invest $1,000 in Bristol Myers Squibb right now?
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb and Pfizer. The Motley Fool has a disclosure policy.
2 Beaten-Down S&P 500 Dividend Stocks to Buy on the Dip and Hold Forever was originally published by The Motley Fool
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