Pfizer (PFE) and Bristol Myers Squibb (BMY), two large drugmakers, share a common profile: both face patent cliffs, both have posted double-digit gains year to date, and both are favorites among income investors. The comparison comes down to which dividend stock is better to buy and hold. Through the Oct. 22 close, Pfizer was up 25.42% year to date, while Bristol Myers Squibb had gained 18.72%.
Pfizer’s forward dividend yield of 5.8% ranks among the highest in the S&P 500, with only a handful of healthcare stocks offering more. Bristol Myers Squibb yields about 4.3%, and unlike Pfizer it keeps raising the payout, having increased the dividend for 17 consecutive years and paid a dividend for 94 consecutive years.
On a GAAP earnings basis, Pfizer’s payout ratio has exceeded 100% in recent quarters, the biggest concern surrounding its dividend. Bristol Myers Squibb keeps its payout ratio near 55% of earnings, a more comfortable cushion. Pfizer still generates sufficient free cash flow to fund the dividend, and management has committed not to cut it; on a current-risk basis, however, Bristol Myers Squibb’s dividend looks safer.
Both companies navigate patent cliffs. Their co-marketed blood thinner Eliquis faces U.S. generic competition in 2028. Pfizer’s Ibrance and Xtandi will also lose patent exclusivity over the next several years, while Bristol Myers Squibb’s cancer immunotherapy Opdivo loses exclusivity within two years.
Bristol Myers Squibb has already crossed a key inflection point, with its growth portfolio driving revenue as the legacy portfolio, including Eliquis, declines. Pfizer also presents an encouraging setup, projecting high single-digit revenue growth after 2028, supported by a pipeline that includes weight-loss candidate berobenatide.
For investors maximizing income, Pfizer is the stronger choice, its yield materially higher than Bristol Myers Squibb’s and likely to remain so. Chief Executive Officer Albert Bourla has publicly defended the company’s ability to maintain the current dividend, and newer products and late-stage candidates are expected to offset exclusivity losses and generate enough free cash flow to fund the payout. Pfizer carries greater execution risk, and Bristol Myers Squibb’s stock may outperform over the next few years: Pfizer offers higher income, while Bristol Myers Squibb may deliver a higher total return.
Holding either stock for the long run should pay off. For income investors, the best approach may be to own both, balancing a higher yield against a safer payout.
