Two High-Return Dividend Shares to Purchase Prior to 2025
The income investing sector has traditionally found solace in the healthcare sector, offering stability and growth potential. Amongst the standouts, Bristol-Myers Squibb (BMY) and Merck & Co. (MRK) distinguish themselves due to their superior dividend yields and robust business models. These health titans have consistently delivered for shareholders, providing dividends despite market fluctuations, while maintaining robust drug development pipelines.
Present market volatility presents a promising opportunity for both stocks heading into 2025. Their dividend yields currently surpass the S&P 500 average, with attractive valuations relative to historical standards. This, in turn, makes them exciting prospects for investors seeking secure positions and reliable income sources.
Let's delve into the reasons why these two high-yield dividend stocks should be considered top picks in the initial phase of the new year.
The Recipe for Lucrative Returns
Bristol-Myers Squibb has cemented its reputation on innovative cancer treatments and strategic acquisitions. Its oncology portfolio boasts revolutionary immunotherapy drugs that have redefined patient care. This stronghold in the market generates substantial cash flows that bolster shareholder dividends.
Dissecting the details further, the pharmaceutical giant offers a dividend yield of 4.3%, maintained by a moderate 59.8% payout ratio. The company's dedication to shareholders is reflected in its consistent annual dividend growth of 7.91% over the last five years. This year's acquisitions of Mirati, RayzeBio, and Karuna have substantially enriched its pipeline, paving the way for the company's future.
However, a formidable challenge looms on the horizon. The company is on the brink of significant patent expiries by 2028 for its blockbuster drugs Opdivo and Eliquis. Moreover, the $74 billion Celgene acquisition in 2019 has saddled the drugmaker with substantial debt, adding unwelcomed financial tension during this transition period. Consequently, the stock has seen a 11.4% decline in value over the past five years.
BMY Total Long Term Debt (Annual) from YCharts.
Regardless, trading at 8.12 times forward earnings, Bristol-Myers Squibb stock presents considerable value, given its successful oncology franchise, acquisition strategy, and generous shareholder rewards. Despite the 2028 patent cliff, the company's impressive dividend growth rate, coupled with its focus on rebuilding its pipeline through strategic deals, makes it alluring for income investors seeking a mix of yield and value.
Financial Pressures Impacting Returns
Merck has carved out a formidable position in specialty pharmaceuticals and oncology. Keytruda, its flagship cancer drug, has revolutionized treatment protocols and contributes significantly to revenue growth. This dominant market presence generates substantial cash flows to support shareholder returns.
Regarding dividends, Merck delivers a 3.25% yield sustained by a robust 64.4% payout ratio. The company's historical track record shines with consistent annual dividend growth of 7.68% over the previous five years. A strategic focus on high-margin specialty drugs and unmet medical needs strengthens its competitive position.
Nevertheless, investors should consider a few potential threats. The upcoming patent expiry for Keytruda in 2028 poses a significant risk to a critical revenue stream. The company's pipeline beyond immuno-oncology must be fortified to offset this future patent cliff. Competition in cancer treatment intensifies, which could potentially challenge Merck's market leadership.
At 10.2 times forward earnings, Merck stock trades at a valuation that reflects both its current oncology leadership and future patent risks. However, with specialty drugs driving strong cash flows and a robust dividend program in place, Merck emerges as an intriguing option for income investors.
Two High-Yield Stocks to Consider
For income investors, these pharmaceutical giants offer two unique value propositions. Bristol-Myers Squibb presents a higher 4.3% yield and a strategic acquisition strategy to combat its 2028 patent cliff. Merck offers a slightly lower 3.25% yield, backed by its strong focus on specialty drugs, ensuring consistent payout growth. Both stocks trade at compelling valuations under 11 times forward earnings, making 2025 an appealing entry point for investors seeking healthcare exposure and growing dividend income.
In the context of the current market volatility, these high-yield dividend stocks, Bristol-Myers Squibb and Merck & Co., are seen as attractive options for investors seeking secure positions and reliable income sources. Bristol-Myers Squibb's dividend yield currently surpasses the S&P 500 average, suggesting an exciting opportunity for income investors.
Given Bristol-Myers Squibb's reputation in innovative cancer treatments and strategic acquisitions, its oncology portfolio and shareholder dividends are bolstered by substantial cash flows. The company's dedication to shareholders is demonstrated by its consistent annual dividend growth and generous shareholder rewards.
