Dividend investing is a reliable pathway to long-term excess returns, which is why high-quality dividend stocks are often sought after and tend to trade at elevated valuations. However, the market also offers income stocks that face near-term headwinds, carry reasonable valuations, and maintain favorable long-term prospects. Pfizer (PFE) and Bristol-Myers Squibb (BMY) exemplify this profile, and their current price levels hold considerable appeal for dividend investors.
Pfizer
In 2022, Pfizer became the first pharmaceutical company to surpass USD 100 billion in annual sales, driven by its COVID-19 vaccine and treatment. Since then, however, as pandemic-related demand has receded, the company’s revenue has continued to decline. At the same time, Eliquis, an anticoagulant for which Pfizer shares rights with Bristol-Myers Squibb, is set to face patent expiration toward the end of this decade.
Nevertheless, the next five years could prove pivotal for Pfizer’s transformation. The company boasts a deep pipeline, with particular strength in oncology. One standout is PF-4404, a bispecific antibody that simultaneously targets two tumor markers, offering greater potency than traditional monoclonal antibodies. It has already entered Phase 3 trials and is regarded as a potential blockbuster. In addition, Pfizer has a candidate in the obesity drug space that has also advanced to Phase 3. Among existing products, the bladder cancer therapy Padcev and the RSV vaccine Abrysvo continue to perform well and will sustain revenue contributions.
Pfizer’s robust pipeline and resilient base business provide support for dividend safety. The current forward dividend yield stands at an attractive 7.1%, and dividends have grown by 51.3% over the past decade. Meanwhile, its forward price-to-earnings ratio is only 8.2 times, far below the healthcare sector average of 18.2 times. This blue-chip stock currently offers compelling valuation, and USD 1,000 can purchase approximately 42 shares at the current price.
Bristol-Myers Squibb
After navigating an earlier patent cliff, Bristol-Myers Squibb has returned to a trajectory of modest revenue growth. However, Eliquis and the cancer drug Opdivo are expected to lose patent protection by the end of this decade. In response, the company has proactively built replacement candidates: a subcutaneous formulation of Opdivo has already been approved and is anticipated to contribute meaningful revenue early in the next decade.
In partnership with Johnson & Johnson, Bristol-Myers Squibb is developing Milvexian, a novel anticoagulant designed to achieve comparable efficacy while reducing bleeding risk. It has received FDA Fast Track designation and holds promising prospects. Additionally, Bristol-Myers Squibb is collaborating with BioNTech on pumitamig, a bispecific antibody candidate. These pipeline projects are expected to make substantial progress over the coming years. At the same time, the company’s recently launched portfolio of new products is performing well and will help gradually replace older drugs.
The company also offers dividend safety. The current forward dividend yield is 4.3%, with dividend growth of 65.8% over the past decade. The forward price-to-earnings ratio stands at just 9 times, indicating a low valuation. At the current share price, USD 1,000 can buy 17 shares.
Summary
Both Pfizer and Bristol-Myers Squibb have seen their share prices pressured by near-term challenges such as patent expirations, and their valuations are significantly below industry averages. Yet both companies possess rich pipelines that are expected to fill revenue gaps in the years ahead, while their existing businesses remain solid, underpinning dividend sustainability. The combination of elevated dividend yields and depressed valuation levels makes these two healthcare blue chips attractive long-term value opportunities at current prices, well suited for investors seeking stable dividend income.
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