Great dividend stocks don’t always have particularly high yields. Still, it’s nice to see a solid income share that has one that’s higher than average. And if this company can reward its shareholders by continually increasing payouts – and if it can do that for longer periods of time – that’s even better. A number of dividend stocks on the market fit this description.
Let’s look at two in the healthcare sector: Bristol Myers Squibb (NYSE: BMY) And Novartis (NYSE: NVS). These drugmakers have a lot to offer long-term investors looking for income.
1. Bristol Myers Squibb
Bristol Myers seems like an excellent choice for income seekers looking for reasonably valued stocks. The drugmaker has lagged the market over the past year due to sluggish sales growth following major patent cliffs. As a result, Bristol Myers’ forward price-to-earnings (P/E) ratio is currently 14.3 – the average for the pharmaceutical industry is 17.4.
Despite the recent problems, Bristol Myers has maintained its dividend program. The company has increased its payouts by 46% over the past five years and offers a juicy dividend yield of around 5%.
Furthermore, even though revenue growth is currently slow, Bristol Myers should be able to bounce back. The key, as always, is developing newer drugs to replace drugs that have lost or will soon lose their patent exclusivity. Bristol Myers has been working on that project for years and has a range of newer drugs approved since 2019.
With the company’s product mix changing significantly, it should ultimately deliver strong financial results again. Bristol Myers expects more than $10 billion in revenue from its new product portfolio by 2026. For context, these products generated $3.6 billion in revenue last year, making this forecast a 77% increase year over year.
The drugmaker estimates that this portfolio will generate revenues of $25 billion by 2030. Naturally, Bristol Myers will earn other brand new approvals in the meantime, judging by its massive pipeline. The company conducts several dozen clinical trials. While this transition period may be somewhat challenging, Bristol Myers should still deliver competitive returns, supported by the strength of its pipeline and a newer product portfolio.
The company can therefore still supply for the next ten years. Investors looking for income shouldn’t be deterred by Bristol Myers’ recent downturn.
2. Novartis
Novartis’s recent financial results have been quite solid. Last year, the Swiss drugmaker’s net sales rose 8% year-on-year to $45.4 billion. The company had thirteen blockbusters this year, most of which sold in the right direction.
Entresto, a heart failure drug, is the most important of the bunch. 2023 revenue of $6 billion rose 30% year over year. Novartis’s overall range is quite diversified, with no single product accounting for a significant percentage of sales.
Moreover, the drug manufacturer is moving forward with brand new drugs. Last year it won approval for an initiative that could become a major growth driver. It is a treatment for paroxysmal nocturnal hemoglobinuria (a rare blood disorder) called Fabhalta. Some analysts expect Fabhalta to reach peak sales of $3.6 billion, which is nothing to sneeze at.
Novartis also took an important step last year when it decided to spin off its generic and biosimilar unit Sandoz into a standalone company. Several pharmaceutical giants have chosen to make similar transactions in recent years. Novartis’ goal was to streamline its operations, put more money into developing new therapies and ultimately boost revenue growth. In my view, the transaction does little to change Novartis’ fundamental thesis: it remains an excellent stock to buy over the long term.
The drugmaker’s dividend history is further evidence supporting this view. Novartis is just over halfway to Dividend King status; it has increased its payouts for 27 years in a row. The company currently offers a dividend yield of 4.04%. Novartis shares don’t look too expensive either, with a forward price-to-earnings ratio of 13.5. All these factors make it an excellent passive income stock to hold for a while.
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Prosper Junior Bakiny has no position in any of the shares mentioned. The Motley Fool holds and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.
2 High-Yield Dividend Stocks to Buy and Hold for 10 Years was originally published by The Motley Fool
