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2 Blue Chips to Buy Now for a Bear Market

By Anirudh Shankar - Jun 8, 2021 at 6:48AM

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If it's steadiness you're after, these two healthcare giants have shown they can perform during a pandemic and beyond.

With markets appearing volatile as of late, it is not uncommon to see some of your holdings down incredible amounts on a given day. It's possible that we might enter a bear market soon, and it's inevitable that we will someday, which is why it's important to identify steady stocks to rely on in good times and bad. You'll want to find companies that will provide adequate coverage in a downturn -- and stocks that pay dividends are one way to hedge your bets.

Two companies that might fit the bill are Bristol Myers Squibb (BMY -2.26%) and Pfizer (PFE -0.70%). Their storied and growing quarterly dividends can provide just the type of stability you need to ride out this next bear market.  

Women running from a bear market

Image source: Getty Images.

1. Pfizer

Founded in 1849, Pfizer has had a very successful track record over its 172-year history, developing and marketing blockbuster products including Viagra (for erectile dysfunction), Zoloft (for depression), and Lipitor (for high cholesterol). Since 1981, the company has shown an annual compounded growth rate of 9.83% per year (excluding dividends), giving investors tremendous gains over that span. Its most recent success was its successful COVID-19 vaccine, BNT162b2. Pfizer will split the profit evenly with its partner BioNTech as billions of doses of their vaccine are distributed all over the world. 

According to Pfizer's Q1 earnings, reported May 4, its vaccine efforts seem to be paying off. The vaccine brought in $3.46 billion in just the first quarter. And while the company suffered an earnings drop of 40% in 2020, to $1.71 a share,, it has more than made up for it this year. Its 2019 earnings came in at $2.87 a share, and its expectations for 2021 are for $3.55 a share -- a 21% increase over 2019.

This growth has come from its vaccine, but also from its existing drugs. Sales of Eliquis (an anticoagulant), Xeljanz (for arthritis), and Vyndamax (for heart issues) grew 25%, 18% and 88% in the quarter, bringing in $1.6 billion, $538 million, and $453 million respectively. Pfizer's share of the revenue for the COVID-19 vaccine is expected to be about $26 billion in 2021, accounting for a little over a third of its expected $70 billion total earnings.

It's likely that the vaccine will generate revenue going forward for Pfizer as well -- additional orders continue to come in from governments needing to vaccinate their people, and booster shots might need to be administered every eight to 12 months. And Pfizer's foundation is very solid beyond the vaccine thanks to ongoing growth in its core set of drugs.

Another metric investors love to see growing is the dividend, which Pfizer has been continuously raising since 2010, most recently with a 3% bump. Pfizer currently offers a 4% dividend yield -- and even during 2020's doldrums, Pfizer was able to raise its dividend to reward shareholders, unlike rivals AstraZeneca and GlaxoSmithKline. Moves like this reaffirm Pfizer's commitment to both running a great business and keeping shareholders happy.

2. Bristol Myers Squibb

Like Pfizer, Bristol Myers Squibb has been around for a very long time. In its 120-plus years, the company has made some great moves to keep it competitive. Well known for popular drugs including chemotherapy treatments Paraplatin and Taxol, the stock has an annual compounded growth rate of 7.85% (excluding dividends) over the past 40 years. 

As companies get older, their growth tends to slow. However, that's not the case with Bristol Myers Squibb, which has grown very handsomely over the last few years. Diluted earnings per share are expected to expand by 19.73% this year, beating the company's own five-year average of 17.75%, as well as the 8.4% average of all companies in the healthcare sector. 

Bristol Myers Squibb is also accelerating its growth through acquisitions, recently announcing the purchase of smaller pharma MyoKardia for $13.1 billion in an all-cash deal. MyoKardia's main focus is developing drugs to treat cardiovascular diseases, with two treatments -- mavacamten and danicamtiv -- that could be on the market fairly soon; mavacamten has already been submitted to the U.S. Food and Drug Administration (FDA) for review. Management noted that the acquisition will not have an impact on Bristol Myers Squibb's earnings in 2021 and 2022, but is expected to add to growth by 2023 when those drugs should hit the market. 

The MyoKardia acquisition makes Bristol Myers Squibb a particularly attractive investment because it provides a promising addition to the company's already dominant cardiovascular portfolio. Eliquis, a best-in-class cardiovascular drug that Bristol Myers Squibb co-developed with Pfizer, has brought in $9.17 billion in 2020 alone. 

Mavacamten, meanwhile, could bring in anywhere from $1.5 billion to $2 billion in sales by 2025 or so, with several billion in annual sales continuing after that. This one drug could possibly pay for the MyoKardia acquisition and help to add to shareholder returns through buybacks and dividends. 

Speaking of dividends, Bristol Myers Squibb recently raised its dividend by 9.3%, bringing investors' quarterly payments per share to $0.49. The company has been paying dividends since 1989. More than 30 years of uninterrupted dividends is a record not that many companies can achieve. Given the growth Bristol Myers Squibb is currently experiencing, this reliable stock could be a name to consider during the next bear market. 

Anirudh Shankar owns shares of Bristol Myers Squibb and Pfizer. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
$49.76 (-0.70%) $0.35
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
$73.86 (-2.26%) $-1.71

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