This Once Dominant Dividend Stock May Be About to Come Back to Life in July

For income investors seeking a timely value stock to buy on the dip, former dividend darling Bristol-Myers Squibb (NYSE:BMY | BMY Price Prediction) may fit the bill as one of the top names to watch in the month of July. Undoubtedly, the stock has been under harsh pressure since peaking in the back half of 2022, now down more than 42% from its November 2022 peak. As shares cratered, the dividend yield swelled well past the 5% mark.

Today, shares of the $95 billion biopharmaceutical firm yield 5.3%, making it a terrific turnaround play that’ll pay investors for their continued patience.

With the company slated to report its quarterly earnings at the end of July, many prospective dip-buyers may be wondering if it’s finally time to get back in the water by buying ahead of earnings due in just over a month. Although it’s impossible to tell how the firm will fare until the numbers are unveiled, I do see the earnings bar as incredibly low. And with that, I see a fairly good risk/reward for investors looking to start a long-term position at today’s valuations.

Key Points in This Article:

• Big Pharma mainstay Bristol-Myers offers upside potential and a high dividend yield at current prices.
• At its current price-to-earnings ratio, BMY can be considered undervalued.
• If you’re looking for a megatrend with massive potential, make sure to grab a complimentary copy of our “The Next NVIDIA” report. This report breaks down AI stocks with 10x potential and will give you a huge leg up on profiting from this massive sea change.

Bristol-Myers Squibb (BMY) Stock Looks Like a Great Dividend Value Buy

Shares of BMY look incredibly interesting at this juncture, given the promising potential in its therapeutic pipeline (Alzheimer’s trials could act as a timely needle-mover for the stock) as well as its ongoing cost savings plan, which aims to save the firm close to $1.5 billion by the end of the year. Of course, it’s tough to justify buying shares of a biopharma firm just because it has a packed pipeline.

If you’ve been around the healthcare scene long enough, you know it takes a few flops before investors and analysts turn their backs on a name. And while there have been some disappointments in recent quarters, including the failure of its late-stage drug Camzyos, I do think it’s a mistake to count the firm out while shares are trading at close to multi-year depths with a still well-covered dividend whose yield is close to multi-year highs.

As of this writing, shares of BMY trade at 17.4 times trailing price-to-earnings (P/E) or 6.9 times forward P/E. That’s ridiculously cheap for a company with an exceptional (and growing) oncology portfolio. Of course, as is the case with many fallen biopharma stocks, the threat of generic competition is weighing on some of the drugs poised to run into patent expiration.

Notably, Revlimid’s patent expired earlier this year, leaving a significant cash flow gap for the firm to fill. There’s no guarantee that any late-stage trials will hit the ground running. But I do think the robust portfolio and continued M&A (the company acquired 2seventy bio in a $286 million deal) could make up for recent shortfalls caused by this year’s patent cliff.

The stock’s dividend currently yields 5.31% annually, or 62 cents quarterly.

Management’s Raised Guidance Is a Vote of Confidence for Dip-Buyers

Indeed, Bristol-Myers has had to deal with a handful of hurdles and setbacks this year, but management doesn’t appear ready to back down. In fact, they’re upbeat despite recent pressures weighing down the stock. Its year-to-date loss of 17.77% has been a tough pill to swallow for shareholders, but the stock is up 5.83% since hitting its year-to-date low on May 14.

The company hiked its full-year sales guidance to $46.3 billion, given Revlimid hasn’t experienced as sharp a decline as expected after facing off with generic rivals earlier this year. Additionally, with more clarity given on the M&A path and a commitment to innovating its way back to greater growth, I’d not look to throw in the towel on the stock as we head into the start of the second half.

Sure, Bristol-Myers isn’t close to being out of the woods yet, but I think analysts are a tad too negative on the name following the recent stumble of some of its most promising drug candidates. Though patent cliffs are never easy to overcome, I do think there’s way too much innovation going on at the firm to count it out while shares are marked down at a historic discount.

Whether you’re mostly interested in the more than 5% yield or the depressed multiple and potential catalysts, I view BMY stock as an intriguing name to keep watch of in July.