Investors are dealing with significant market volatility amid trade wars, geopolitical tensions, etc. Some are worried about inflation rising, a potential market downturn, or perhaps even a recession. In an environment like this, it helps to invest in companies that can perform relatively well regardless of market or economic conditions. Corporations with excellent dividend programs are especially worth a second look right now. In that spirit, let's consider a solid dividend stock whose shares look attractive: Bristol Myers Squibb (BMY 2.80%).
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It could be a steady wealth compounder
Bristol Myers is a leading company in a defensive pharmaceutical industry that's built to handle the toughest environments. Not only are lifesaving drugs some of the ultimate "essential goods," but because of the nature of the industry, and the fact that third-party payers foot much of the bill for prescription medicines, demand remains fairly consistent through good and bad economic times.
Bristol Myers' portfolio spans several areas, including oncology -- where it is a leader -- immunology, rare diseases, and others. The company has encountered some troubles in recent years, particularly due to patent cliffs. Revenue growth hasn't been strong as a result. In the fourth quarter, Bristol Myers' sales increased by just 1% year over year to $12.5 billion.
NYSE: BMY
Key Data Points
However, Bristol Myers has an innovative engine that should allow it to launch newer products and eventually move beyond generic or biosimilar competition for older drugs. The company is already slowly doing so, thanks to a growth portfolio mostly composed of therapies approved since 2019 or so. These include a new, subcutaneous formulation of Bristol Myers' famous and highly successful oncology franchise, Opdivo.
Even with the old version set to lose patent exclusivity in a couple of years, this franchise, which has been one of Bristol Myers' growth drivers for a while, should continue contributing. How is the company's growth portfolio performing? In the fourth quarter, it reported $7.4 billion in sales, up 16% year over year. Top-line growth should bounce back as the impact from off-patent medicines on the company's financial results continues to fade and newer products gain more traction and earn label expansions
So, Bristol Myers should be in good shape, even in a highly volatile market. What about the company's dividend? Bristol Myers offers a juicy forward yield of 4.2%, which is well above the S&P 500's average of 1.2%. The company has increased its dividends by 65.8% over the past 10 years, and its cash payout ratio of 39.3% leaves ample room for more dividend growth.
Lastly, Bristol Myers' valuation looks reasonable right now. The company is trading at 9.5x forward earnings, well below the healthcare sector's forward price-to-earnings average of 17.1. In short, Bristol Myers is a stable company capable of delivering strong financial results over the long term -- even as the market and the economy experience downturns -- while rewarding shareholders with a growing dividend. In today's precarious environment, that may be exactly what the doctor ordered.
