Is Bristol Myers Squibb's 4.3% Dividend Yield Safe? Here's What Investors Need to Know.
Bristol Myers Squibb (NYSE: BMY) belongs to an elite group. Only two other large-cap healthcare stocks offer higher dividend yields. Bristol Myers Squibb's juicy yield of 4.3% is absolutely grabbing the attention of many income investors.
The drugmaker has paid a dividend for an impressive 94 consecutive years. Bristol Myers Squibb has increased its dividend for 17 straight years. But is its dividend safe now? Here's what investors need to know.
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Let's start with some good news. Bristol Myers Squibb's dividend payout ratio currently stands at 70%. While a lower ratio is preferable, the pharma giant's earnings are more than sufficient to cover its dividend right now.
Sure, Bristol Myers Squibb didn't generate enough free cash flow in the first quarter of 2026 to fund its dividend program. However, this reflected the negative impact of lower Eliquis pricing that should be largely offset later this year by lower rebate payments.
The bad news for Bristol Myers Squibb's dividend, though, is the company's looming patent cliff. Blockbuster drugs Eliquis and Opdivo lose patent exclusivity in 2028. These two products generated roughly half of Bristol Myers Squibb's total revenue last year.
However, the patent cliff is only part of the story. Bristol Myers Squibb's growth portfolio now represents the majority of the company's total revenue. Sales for newer products, including cancer immunotherapies Breyanzi and Opdualag, autoimmune disease drug Sotyktu, and schizophrenia therapy Cobenfy, are growing rapidly. The drugmaker's pipeline also features around 50 programs in development, several of which hold the potential to be growth catalysts.
My take is that Bristol Myers Squibb's 4.3% dividend yield is safe, at least for the next couple of years. What about beyond that point? I'm cautiously optimistic.
I expect that Bristol Myers Squibb's growth portfolio will generate enough revenue that the company will be able to avoid cutting its dividend later this decade. It wouldn't surprise me, though, if the streak of dividend increases comes to a screeching halt.
That said, it's still possible that the patent cliff could hurt Bristol Myers Squibb worse than I'm anticipating. The drugmaker's debt also totaled $44.5 billion at the end of the first quarter of 2026. That's manageable but coud become problematic if the growth portfolio and pipeline don't deliver as I think they will.
I wouldn't completely rule out a dividend cut in the future. However, I still view this pharma stock as a good pick for income investors over the near term (and potentially over the long term, too).
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Keith Speights has positions in Bristol Myers Squibb. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.
Is Bristol Myers Squibb's 4.3% Dividend Yield Safe? Here's What Investors Need to Know. was originally published by The Motley Fool