Dividend investing is a proven way to earn above average long-term returns. That’s why top dividend stocks often attract large crowds of investors and trade at a premium. However, it is possible to find quality income stocks that are appropriately – or even attractively – valued, perhaps because they have faced challenges from which they will overcome, but the market has yet to catch up.
Let’s consider two dividend stocks that fit this description: Pfizer (NYSE:PFE) and bristol myers squibb (NYSE:BMY). For dividend seekers who have an extra $1,000—not saved for bills or emergencies—that’s why investing in these stocks would be a good idea.
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1. Pfizer
In 2022, Pfizer became the first biopharmaceutical company to reach $100 billion in annual sales, largely due to its dominance in the coronavirus market. But it’s pretty downhill from there. The drugmaker was unable to maintain solid revenue from its COVID-19 products as vaccination and hospitalization rates declined. Additionally, Pfizer will face significant patent difficulties by the end of the decade. The company’s anticoagulant Eliquis, the rights to which it shares with Bristol Myers, will lose patent exclusivity.
Then, it’s not surprising that the company has lagged broader equities recently. However, the next five years could be transformative for pharmaceutical giant Because it advances important pipeline candidates. Pfizer has a deep pipeline, and multiple “shots on target” should allow it to launch brand-new, highly successful products even with occasional clinical setbacks.
of the company oncology The pipeline looks particularly attractive, including candidates such as PF’4404, an investigational drug in a new class of cancer drugs, specific antibodies. Unlike traditional monoclonal antibodies, the current standard of care in oncology, which target one disease marker, bispecific antibodies can target two at the same time, often making them more effective at finding and destroying cancer cells. Pfizer believes that PF’4404 could be a lead-in-the-pipeline drug that could achieve approval in multiple market segments.
The drug is currently in Phase 3 studies and could lead to important clinical wins in the coming years. And it is one of several promising candidates in Pfizer’s oncology pipeline. The company is also making solid progress with its weight loss pipeline, with some candidates currently in Phase 3 studies. Meanwhile, even though Pfizer’s financial results have not been good, some of its products are performing well and will help boost sales in the near future. The company’s bladder cancer drug Padsave and its respiratory syncytial virus vaccine, Abrisvo, are good examples.
Pfizer’s strong pipeline and resilient underlying business (despite some headwinds) means its dividend is unlikely to be cut. It currently offers a forward yield of 7.1% and its payout has increased by 51.3% over the past decade. Finally, the stock is trading at just 8.2x Forward Earnings, while healthcare stocks average 18.2. This blue chip dividend stock looks like a strong buy at current levels. And with $1,000, investors can buy 42 shares of Pfizer.
2. Bristol Myers Squibb
After facing some patent difficulties in recent years, Bristol Myers is back on the right track. The company’s revenue is moving in the right direction again, albeit slowly. However, the pharmaceutical leader will face more patent problems by the end of the decade, particularly for two of its best-selling drugs, Eliquis and cancer drug Opdivo. Bristol Myers appears well-equipped to replace those two drugs and, with the approval of a subcutaneous version of Opdivo, has already taken important steps in that direction that will contribute to its top-line over the next decade.
Elsewhere, Bristol is partnering with Myers johnson and johnson (NYSE:JNJ) will develop Milvexion, a next-generation anticoagulant that aims to be as effective as competitors while avoiding the bleeding risks associated with typical anticoagulants. Milvaxion has received Fast Track designation from the U.S. Food and Drug Administration, a program that helps accelerate the review and approval of drugs that treat serious conditions and address high unmet need.
This suggests that the data so far suggest that Milvexion may be as good as advertised. Additionally, Bristol Myers is looking to enter the specific antibody market and is working on a promising candidate, Pumitamig. BioNTech (NASDAQ:BNTX). Expect solid progress from these (and other) candidates over the next few years. And in the meantime, despite major patent woes, Bristol Myers has a portfolio of new launches that are performing well and should eventually help replace older drugs.
The company is not at risk of its dividend being cut. Bristol Myers has a forward yield of 4.3%, and its payout has increased by 65.8% over the last decade. Ultimately, with the stock trading at 9x forward earnings, now is a great time to buy. $1,000 is good for 17 shares at the current stock price.
Should you buy stock in Pfizer now?
Consider this before buying stock in Pfizer:
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Prosper Junior Bikini Positions at Johnson & Johnson. The Motley Fool has positions in and recommends Bristol Myers Squibb and Pfizer. The Motley Fool recommends BioNTech and Johnson & Johnson. The Motley Fool has one Disclosure Policy.
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