If you’re thinking about long-term stock ownership, there are some lesser-known pharmaceutical companies worth considering for their resilience.
Pfizer and Bristol-Myers Squibb are among the largest, most respected players in the pharmaceutical industry. For those interested in solid companies, healthcare might be a good sector to explore right now. Both companies appear undervalued at this moment, which could be a great opportunity for buy-and-hold investors.
Despite facing similar challenges, Pfizer and Bristol-Myers Squibb have shown they can navigate tough times effectively. Let’s take a closer look at each company’s stock and their attractive dividend yields.
1. Pfizer’s Dividend is Risky
One of the most appealing aspects of Pfizer for income investors is its notable dividend yield of 6.7%. However, there’s a catch: this yield is backed by a 12-month payout ratio around 100%. Additionally, a recently announced multibillion-dollar acquisition may exert more financial strain on the company and its dividends.
Today’s changes
(-0.04%) $-0.01
current price
$25.70
Key data points
Market capitalization
$146 billion
daily range
$25.66 – $25.86
52 week range
$20.91 – $27.69
volume
681K
average volume
67M
gross profit
69.12%
dividend yield
6.68%
Nonetheless, this acquisition could be a positive sign, showing that Pfizer is willing to take decisive actions to refocus its business. The issue of the patent cliff is a concern, as it often leads to declining revenues when flagship drugs lose their patent protections. While Pfizer’s patent situation is challenging, it’s not unusual for pharmaceutical companies.
History suggests Pfizer is adept at managing the patent cliff scenario. Its efforts with the Mezzala obesity drug candidate indicate proactive measures. The high payout ratio poses some risk, but if you consider Pfizer a value stock rather than merely a dividend stock, it might be a good time to invest. The company’s price-to-sales and price-to-book ratios are currently lower than their historical averages. If the dividend holds, it could be a positive development.
2. Bristol-Myers Squibb’s Dividend Appears Safer
Bristol-Myers Squibb has a dividend payout ratio over 80%. Offering a market-beating 5% dividend yield, it carries some risk, but it’s relatively less risky compared to Pfizer’s dividends. If dividends are a priority for you, Bristol-Myers Squibb might be the more appealing choice.
Similar to Pfizer, Bristol-Myers Squibb is also confronting a patent cliff but has historically managed these challenges well. Currently, they are developing new drugs in bispecific immunotherapy, which might lead to innovative cancer treatments. This effort could rekindle investor interest. Although leverage has slightly increased since acquiring Celgene, the company is already working on reducing it, which likely won’t deter cautious investors.
Today’s changes
(-0.10%) $-0.05
current price
$49.20
Key data points
Market capitalization
$100 billion
daily range
$49.01 – $49.37
52 week range
$42.52 – $63.33
volume
6.2M
average volume
16M
gross profit
64.33%
dividend yield
5.04%
The company’s price-to-sales ratio is currently under its five-year average, and its dividend yield is on the higher end of its historical range, suggesting it may be a good deal for investors.
Pfizer and Bristol-Myers Squibb Are Here to Stay
The key takeaway is that both of these healthcare stocks produce essential products that will remain in demand for years ahead. While there may be short-term worries about the patent cliff, both companies have consistently shown they have the research capabilities to grow in the long term. If you’re a buy-and-hold investor who doesn’t mind taking a position when there’s fear in the market, either of these stocks could be a worthwhile addition to your portfolio.
