Investors looking for high-yielding dividend stocks to buy now should pay attention to the healthcare sector: Three reliable drugmakers are trading near 52-week highs.
The stock price may be down, but better days are likely to come. Here’s how these stocks can generate a lot of passive income for patient investors who buy now.
1. Pfizer
Share from Pfizer (NYSE: PFE) is down about 55% from its early 2022 peak. At its most recent price, it offers a dividend yield of 6.2%. In summary, the stock is down as sales of COVID-related products decline faster than expected.
Income-seeking investors will be happy to know that Pfizer knows how to manage during a period when sales of some of its drugs are declining rapidly. 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 biggest revenue streams have suddenly dried up.
Despite declining sales of COVID-19 products, management expects adjusted earnings between $2.15 per share and $2.35 per share this year. The company pays a $1.68 dividend per share last year and has an annual dividend yield of 1.68%.
Investors can expect another 15 years of steady payments from Pfizer. The Food and Drug Administration approved a record nine new drugs for the company by 2023, and that’s not the only source of new revenue. In 2023, Pfizer acquired Seagen, a cancer drug developer with four commercial therapies.
2. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) The stock is down about 22% from its peak in 2021. In April, the drug and medical technology company raised its dividend for 62 consecutive years.
J&J also experienced a rapid decline in sales of its COVID-19 products while they were rising, but that didn’t stop it from paying a 30.5% dividend over the past five years. Johnson & Johnson’s stock price is revised to +3.4% for the week.
Shareholders can expect more significant profits. Last year, Johnson & Johnson completed the spin-off of its slow-growing consumer goods segment into a new company under its name Kenvue. This year, management expects adjusted earnings per share to rise 7.7% at the midpoint of its guidance range.
A lot can happen over the next 62 years, but investors can look forward to at least another decade of significant dividend growth from J&J as its various businesses expand. For example, in the first quarter, sales of the company’s Impella heart pump grew 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. Factoring in the impact of sales of the COVID-19 vaccine, pharmaceutical profits rose 8.3% year over year in the first quarter.
3. Bristol Myers Squibb
Share from Bristol Myers Squibb (NYSE: BMY) is down about 50% from the peak it reached at the end of 2022. At the beaten price, the pharma stock offers a dividend yield of 5.9%.
In December, Bristol Myers Squibb raised its quarterly payout for the 15th consecutive year, and the bump in payout has been stronger than most of its peers. Pharmaceutical companies have raised payouts by 46% over the past five years.
The stock market has beaten Bristol Myers Squib shares in part because it reported a massive loss of $11.9 billion in the first quarter. The loss was due to a $12.9 billion charge recorded for research and development (IPR&D) acquired – in other words, issues related to new acquisitions. In the first quarter, it completed transactions with four companies, including Karuna Therapeutics.
Karuna is developing a next-generation schizophrenia treatment called KarXT that has been shown in clinical studies to significantly improve symptoms. The Food and Drug Administration is reviewing it now, and a decision will be announced on or before September 26.
Bristol Myers Squibb generated $12.5 billion in free cash flow last year and needed only 38% of that amount to cover dividend payments. With potential help from KarXT and several other recently acquired candidates in late-stage development, another 15-year dividend hike is not an unreasonable expectation.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions 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
