The pharmaceutical industry giants offer reliable profit growth and above-average dividend yields.
Investors looking for high-yield dividend stocks to buy now should turn their attention toward the healthcare sector: Three relatively reliable drugmakers are trading near their 52-week lows.
Their stock prices may have been beaten down, but it's more than likely that better days are ahead. Here's how these stocks could produce heaps of passive income for patient investors who buy now.
1. Pfizer
Shares of Pfizer (PFE) have fallen about 55% from their early 2022 peak. At recent prices, they offer an eye-popping 6.2% dividend yield. In a nutshell, the stock tanked because sales of its COVID-related products fell much faster than expected.
Income-seeking investors will be glad to know that Pfizer knows how to manage through periods when sales of a few of its drugs are rapidly declining. The pharmaceutical giant has been able to raise its dividend payout every year since 2009, and this isn't the first time some of its largest revenue streams have suddenly dried up.
Despite declining sales of its COVID-19 products, management expects adjusted earnings of between $2.15 per share and $2.35 per share this year. That will be more than enough to cover a dividend payout currently set at $1.68 per share annually.
Investors can reasonably expect another 15 years of steady payout raises from Pfizer. The Food and Drug Administration approved a record nine new drugs for the company in 2023, and those aren't even its only new sources of revenue. In 2023, Pfizer acquired Seagen, a cancer drug developer with four commercialized therapies.
2. Johnson & Johnson
Johnson & Johnson (JNJ 0.66%) stock is down about 22% from the all-time high it touched in 2021. In April, the drug and medical technology company raised its dividend payout for the 62nd year in a row.
J&J also experienced COVID-19 product sales that fell as quickly as they rose, but that didn't prevent it from raising its dividend payout by 30.5% over the past five years. At recent prices, shares of Johnson & Johnson offer a nice 3.4% yield.
Shareholders can look forward to more significant payout bumps. Last year, Johnson & Johnson completed the spin-off of its relatively slow-growing consumer goods segment into a new company named Kenvue. This year, management expects adjusted earnings per share to rise by 7.7% at the midpoint of its guidance range.
A lot could happen over the next 62 years, but investors can reasonably expect at least another decade of significant dividend growth from J&J as its various businesses thrive. For example, in the first quarter, sales of the company's Impella heart pumps soared 15% year over year, and there aren't any competing devices on the horizon.
Medical technology isn't the only operating segment that's firing on all cylinders for J&J these days. Factoring out the impact of COVID-19 vaccine sales, its pharmaceutical revenue rose 8.3% year over year in the first quarter.
3. Bristol Myers Squibb
Shares of Bristol Myers Squibb (BMY 2.17%) have dropped by about 50% from the peak they reached in late 2022. At its beaten-down price, the pharma stock offers a 5.9% dividend yield.
In December, Bristol Myers Squibb raised its quarterly payout for the 15th consecutive year, and those payout bumps have been more robust than those offered by most of its peers. The pharmaceutical company has raised its payouts by 46% over the past five years.
The stock market has been hammering Bristol Myers Squib stock partly because it reported a heavy loss of $11.9 billion in the first quarter. That loss was due to a $12.9 billion charge it recorded for acquired in-process research and development (IPR&D) -- in other words, issues related to recent acquisitions. In the first quarter alone, it completed transactions with four companies, including Karuna Therapeutics.
Karuna is developing a next-generation schizophrenia treatment called KarXT that has already been shown in clinical studies to significantly improve symptoms. The Food and Drug Administration is reviewing it now, and its decision is expected to be announced on or before Sept. 26.
Bristol Myers Squibb generated $12.5 billion in free cash flow over the past year and needed just 38% of this sum to cover its dividend payments. With potential help from KarXT and a handful of other recently acquired candidates in late-stage development, another 15-year streak of dividend raises isn't an unreasonable expectation.
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb, Kenvue, and Pfizer. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.
