1 Reason to Buy Bristol Myers Squibb Stock

Bristol Myers Squibb (BMY) offers a 5.5% dividend yield with a 25-year growth history, even as it navigates patent expirations for key revenue drivers like Revlimid and the upcoming loss of exclusivity for Eliquis, which constitutes 31% of current revenue. The company is offsetting these challenges with a strong portfolio of recently launched drugs, including Breyanzi and the newly approved Cobenfy, which are projected to drive future growth. With expected 2023 EPS of $6.35-$6.65 significantly covering its $2.48 annual dividend, BMY's new product pipeline is seen as sufficient to sustain its high yield and dividend growth despite patent cliffs.

Analysis

Bristol Myers Squibb (BMY) presents a compelling case for income-focused investors, offering a 5.5% dividend yield, substantially higher than the S&P 500 average of 1.2%, backed by a 25-year history of payout growth. This elevated yield reflects significant market concern over patent expirations for key products. The company is already navigating the loss of exclusivity for Revlimid, which peaked at $12.8 billion in 2021 sales, and faces a more critical cliff in a few years for Eliquis, a blood thinner currently responsible for approximately 31% of total revenue. However, the company's strategy to mitigate these headwinds centers on a portfolio of newly launched drugs. This growth portfolio includes at least seven products that exhibited double-digit percentage sales growth in the second quarter, highlighted by the cell-based cancer therapy Breyanzi, whose sales more than doubled. Furthermore, the recently approved schizophrenia treatment, Cobenfy, is projected to achieve $2.6 billion in sales by 2030. The company's financial position appears robust enough to support its dividend through this transition, with forecasted annual earnings of $6.35 to $6.65 per share comfortably covering the current annualized dividend of $2.48 per share, suggesting the new product pipeline is positioned to offset the impending revenue losses.

Key Decisions for Investors

• For income-oriented investors, BMY's well-covered 5.5% dividend yield presents an attractive opportunity, though it is accompanied by the risk that new drug launches may not meet growth targets.
• Investors should closely monitor the quarterly sales performance of the growth portfolio, particularly Breyanzi and Cobenfy, as their success is the critical variable in offsetting the revenue decline from the Eliquis patent expiration.
• The current valuation appears to reflect pessimism regarding the patent cliffs, offering a potential value entry point if management successfully executes its pipeline strategy and maintains dividend coverage.