Look for investments that can outperform the benchmark S&P500 index often becomes incredibly complicated. If you’re new to the investing process, you’ll be happy to know that building a portfolio that can outperform the broad market isn’t as difficult as it seems.
Filling your portfolio with top dividend-paying stocks won’t guarantee great returns, but you should be unlucky enough to underperform in this way. From 1973 through 2023, the average dividend-paying stock in the S&P 500 index delivered an annual return of 9.17%. Stocks in the same index without dividend programs delivered a paltry average annual return of 4.27% over the same period, according to Hartford Funds and Ned Davis Research.
Investors looking for stocks that can deliver satisfying returns with limited risk will want to focus their attention here Bristol Myers Squibb (NYSE: BMY) And AT&T (NYSE:T). Just $100 is enough to buy shares of both dividend-paying stocks, and you won’t have to wait long for them to deliver significant levels of passive income. Both now offer above-average yields and are well positioned to grow their dividend payments.
Bristol Myers Squibb
If you’ve recently had major surgery, chances are you also have a prescription for Eliquis, a drug that Bristol Myers Squibb markets in partnership with Pfizer. Sales of the blood clotting prevention tablet rose 9% year-on-year to $3.7 billion in the first quarter.
Patent protection should keep generic competition away from Eliquis until at least 2028, and it’s one of Bristol Myers Squibb’s many blockbusters with years of patent-protected market exclusivity ahead.
The company’s growth portfolio includes twelve drugs that are younger than Eliquis, and their sales are soaring. The company’s growth portfolio increased first-quarter revenue by 11% year-over-year when excluding the negative effects of a strengthening dollar.
Bristol Myers Squibb’s growth portfolio has recently been expanded. On May 30, the Food and Drug Administration approved a new cell-based cancer therapy from the company Breyanzi.
It’s been 92 years since Bristol Myers Squibb started paying dividends and 15 years since it went more than a year without increasing the payout at least once. At recent prices, pharmaceutical stocks offer a 5.9% yield and a strong chance to see the payout rise for another 15 years.
In the first quarter, Bristol Myers Squibb completed the acquisitions of Mirati Therapeutics, RayzeBio and Karuna Therapeutics. All three are in late-stage clinical trials of experimental therapies that could eventually become blockbuster drugs with annual sales of more than $1 billion.
AT&T
AT&T cut its dividend payout in 2022 to offset the spinoff of its media assets. The telecom company’s share price has been under pressure since the dividend cut. At recent prices, the stock offers an attractive yield of 6.3%.
AT&T lost many broadband subscribers to competitors with 5G-powered fixed wireless services. However, it launched its own fixed wireless service late last year, and customers seem eager to sign up. The company added 110,000 AT&T Internet Air subscribers in the first quarter, marking the third straight quarter of net increases for the broadband segment.
Declining equipment sales limited first-quarter revenue growth in the mobility segment to 0.1% year-over-year. While AT&T can’t generate much interest in the latest iPhone, investors should be encouraged by the net 741,000 new wireless subscribers the company added in the first three months of the year.
AT&T generated $21.9 billion in free cash flow over the past twelve months. That’s enough to cover a dividend obligation currently set at about $8.1 billion per year, while significantly reducing its debt load.
AT&T ended March with $128.7 billion in net debt, after repaying $4.7 billion in the first quarter. The company expects to reduce net debt to 2.5 times adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the first half of 2025.
AT&T has not outlined any plans to increase its dividend. That said, I’ll be surprised if the company doesn’t increase the payout again after it reaches its debt reduction target next year. Adding a few shares of the high-yield stock to your portfolio now could lead to huge amounts of passive income over time.
Should you invest $1,000 in Bristol Myers Squibb now?
Before you buy shares in Bristol Myers Squibb, consider the following:
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Cory Renauer has no positions in any of the stocks mentioned. The Motley Fool holds and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.
2 No-Brainer Dividend Stocks to Buy for $100 in June was originally published by The Motley Fool
