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Bristol-Myers Squibb (BMY) is a Top Dividend Stock Right Now: Should You Buy?

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Bristol-Myers Squibb in Focus

Headquartered in New York, Bristol-Myers Squibb (BMY - Free Report) is a Medical stock that has seen a price change of -12.81% so far this year. Currently paying a dividend of $0.45 per share, the company has a dividend yield of 3.22%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.84%, while the S&P 500's yield is 1.93%.

In terms of dividend growth, the company's current annualized dividend of $1.80 is up 9.8% from last year. Over the last 5 years, Bristol-Myers Squibb has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.88%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Bristol-Myers's current payout ratio is 34%. This means it paid out 34% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, BMY expects solid earnings growth. The Zacks Consensus Estimate for 2020 is $6.14 per share, which represents a year-over-year growth rate of 30.92%.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, BMY presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).


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