Investors looking for high-yield dividend stocks to buy now should turn their attention to the healthcare sector: Three relatively reliable drugmakers are trading near their 52-week lows.
Their stock prices may have fallen, but it is more than likely that better days are ahead. Here’s how these stocks can deliver tons of passive income for patient investors who buy now.
1. Pfizer
Shares of Pfizer (NYSE:PFE) are down about 55% from their peak in early 2022. At recent prices, they offer an eye-watering 6.2% dividend yield. In short, the stock plummeted as sales of its COVID-related products fell much faster than expected.
Investors looking for income will be happy to know that Pfizer knows how to get by during periods when sales of some of its drugs are falling precipitously. The pharmaceutical giant has managed to increase its dividend payout every year since 2009, and this isn’t the first time some of its biggest revenue streams have suddenly dried up.
Despite declining sales of its COVID-19 products, management expects adjusted earnings between $2.15 per share and $2.35 per share this year. That will be more than enough to cover the dividend payout currently set at $1.68 per share per year.
Investors can reasonably expect steady payout increases from Pfizer for another 15 years. The Food and Drug Administration has approved a record nine new drugs for the company in 2023, and those aren’t even the only new sources of revenue. In 2023, Pfizer acquired Seagen, a cancer drug developer with four commercialized therapies.
2. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) Share prices are down about 22% from their all-time high in 2021. In April, the drug and medical technology company increased its dividend payout for the 62nd year in a row.
J&J also faced sales of COVID-19 products that fell as quickly as they rose, but that didn’t stop the company from increasing its dividend payout by 30.5% over the past five years. At recent prices, Johnson & Johnson shares offer a nice yield of 3.4%.
Shareholders can look forward to even bigger payout increases. Last year, Johnson & Johnson completed the spin-off of its relatively slow-growing consumer goods segment into a new company called Kenvue. This year, management expects adjusted earnings per share to rise 7.7%, midway between expectations.
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 J&J’s various businesses flourish. For example, in the first quarter, sales of the company’s Impella heart pumps rose 15% year over year, and there are no competing devices on the horizon.
Medical technology isn’t the only operating segment firing on all cylinders for J&J these days. Excluding the impact of COVID-19 vaccine sales, pharmaceutical revenues rose 8.3% year over year in the first quarter.
3. Bristol Myers Squibb
Shares of Bristol Myers Squibb (NYSE:BMY) have fallen by about 50% from the peak they reached at the end of 2022. At the low price, the pharmaceutical stocks offer a dividend yield of 5.9%.
In December, Bristol Myers Squibb increased quarterly payouts for the fifteenth year in a row, and these payout increases were more robust than those of most of its peers. The pharmaceutical company has increased its payouts by 46% over the past five years.
The stock market has put pressure on Bristol Myers Squib’s stock, in part because it reported a heavy $11.9 billion loss 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, which has already been shown in clinical trials to significantly improve symptoms. The Food and Drug Administration is now reviewing the proposal and its decision is expected to be announced on or before September 26.
Bristol Myers Squibb generated $12.5 billion in free cash flow last year and only needed 38% of this amount to cover its dividend payments. With potential help from KarXT and a handful of other recently acquired candidates in late-stage development, another round of dividend increases over 15 years isn’t an unreasonable expectation.
Should you invest €1,000 in Pfizer now?
Consider the following before buying shares in Pfizer:
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool holds 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.
3 High-Yield Dividend Stocks Near 52-Week Lows to Buy and Hold was originally published by The Motley Fool
