Tags: bristol-myers squibb | dividend | yield | drugs

Bristol-Myers Squibb: Reliable Dividend Stock for Yield and Growth

Bristol-Myers Squibb: Reliable Dividend Stock for Yield and Growth
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By Tuesday, 05 January 2021 02:35 PM Current | Bio | Archive

Dividend stocks tend to be popular investments because they generally offer investors stable and growing earnings, as well as regular dividend income. These characteristics can be especially valuable during market downturns, when dividend stocks tend to outperform stocks that do not pay dividends.

This hasn’t been lost on institutional investors like OrbiMed Advisors and others that own pharmaceutical giant Bristol-Myers Squibb (BMY). Bristol-Myers has a decade-long history of raising its dividend, and the current yield is above 3%.

In this article, we will discuss Bristol-Myers’ prospects as a dividend investment.

Is Bristol-Myers Squibb a Strong Dividend Stock?

Bristol-Myers has many of the characteristics investors want to see when selecting a dividend stock. It has a product portfolio that is highly diversified, it operates in a very recession-friendly industry, it has massive scale, earnings are growing steadily, and its payout ratio is low.

The company’s product portfolio is huge, consisting of a wide variety of drugs that generally focus on cancer and cardiovascular disease treatments. These indications have wide and deep market opportunities given Bristol-Myers treats diseases that are fairly common, but also have no cure. This means the patient pool is generally growing, and revenue is recurring. For a dividend stock, recurring, reliable revenue is a key factor.

Second, pharmaceuticals tend not to see material changes in demand due to economic conditions. After all, if someone is sick, they will usually seek treatment irrespective of economic conditions as treatments are not discretionary. For a dividend investor, that means that when recessions do inevitably strike, companies with this sort of demand curve are better able to weather the storm, and continue to pay dividends.

Third, Bristol-Myers has massive scale thanks to its vast product portfolio. The company is set to produce in excess of $45 billion in revenue this year, and its current market capitalization is approximately $138 billion. This kind of scale is helping to dividend investors because shares of companies this large tend to be less volatile. When you couple this with Bristol-Myers’ product portfolio, the typical volatility stocks see during recessions is markedly less so in this case.

Fourth, the company’s earnings have been growing nicely in recent years, which has afforded Bristol-Myers the ability to continue to raise its payout without undue financial stress. After bottoming at $0.93 per share in 2015, earnings have rebounded sharply and our 2020 estimate is for $6.30 in earnings-per-share. Bristol-Myers has been able to capitalize on rising revenue and turn it into profits, which is key for its ability to pay the dividend.

Finally, Bristol-Myers’ dividend ratio is quite low at just 29% for this year. A payout ratio this low means that not only is the dividend very safe, it means Bristol-Myers can afford to continue paying it even if earnings fall sharply. This margin of safety is highly attractive to dividend investors as the payout should continue through any recessions that may strike, and it means that the company can continue to raise its payout for years to come.

With earnings-per-share growth of 4% projected for the next five years, we see Bristol-Myers’ dividend as very safe, and with a long runway for payout increases.

Final Thoughts

Bristol-Myers has been owned in large quantities by institutions for years because of its stable and growing earnings base, its strong current yield, and the safety of the dividend. The stock also has the added bonus of recession resilience, and we think Bristol-Myers is a strong dividend stock investment for these reasons.

Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

 

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BobCiura
Dividend stocks tend to be popular investments because they generally offer investors stable and growing earnings, as well as regular dividend income. These characteristics can be especially valuable during market downturns, when dividend stocks tend to outperform stocks...
bristol-myers squibb, dividend, yield, drugs
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2021-35-05
Tuesday, 05 January 2021 02:35 PM
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