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3 Beaten-Down Dividend Stocks -- Are They Bargins Now?

By Cory Renauer – Dec 6, 2021 at 6:54AM

Key Points

  • Viatris is a drug-making giant with large cash flows to share with investors.
  • Annaly Capital Management is a real estate investment trust that invests mostly in government-backed mortgage securities.
  • Bristol Myers Squibb offers a juicy yield right now because investors are concerned about upcoming generic competition for the pharmaceutical company's top-selling drug.

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Rising quarterly payouts and above-average yields make these dividend stocks worthy of your immediate attention.

Shares of some high-yield dividend stocks are down sharply this year. Those lower prices are raising the dividend yields these stocks offer, but that won't help you retire sooner if they can't keep raising the payout.

These three dividend payers are in a relatively strong position, at least on the surface. Let's look under the hood to see if the underlying businesses generating cash for these dividends can keep making and raising payments for the long run. 

Investors saving for the future.

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Viatris (VTRS -2.59%) shares have tumbled around 35% from their high point this winter. Now the pharmaceutical stock is trading for significantly less than the company's book value

This is a relatively new entity formed from the combination of the generic drugmaker, Mylan, and Pfizer's Upjohn. Upjohn was where Pfizer sent drugs after they lost patent-protected market exclusivity.

At recent prices, Viatris offers an attractive 3.6% yield that some analysts fear could be difficult to raise in the years ahead. The stock has been tumbling in response to drug pricing reforms in China and general uncertainty regarding legacy products like Lyrica and EpiPen.

Viatris reported strong third-quarter earnings that suggest a big dividend raise could be in the cards for 2022. In the first nine months of the year, the company delivered $266 million to investors in the form of dividends. Free cash flow, which can be used to pay for dividends, debts, and acquisitions reached $965 million in the third quarter alone.

The upcoming launch of Semglee could allow Viatris to make a big payout bump in 2022 and beyond. It's the first interchangeable biosimilar for Sanofi's blockbuster diabetes drug, Lantus. As an interchangeable biosimilar, patients can receive lower-cost Semglee from their pharmacist even if their doctor prescribes Lantus. 

Investor shopping for dividend stoks.

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Annaly Capital Management

Annaly Capital Management (NLY -1.83%) shares have dipped 14% from the 52-week high the stock reached in June. Now it offers a great big 10.8% dividend yield. 

This company is a real estate investment trust (REIT) that doesn't actually buy real estate. Instead, Annaly Capital Management buys long-term mortgage-backed securities. Just like traditional REITs, it also avoids federal taxation as long as it distributes at least 90% of net earnings to investors as a dividend.

When average yields on its long-term assets exceed the company's costs of capital, all is well and shareholders get steady dividends and maybe even a payout raise. Unfortunately, economic uncertainty and anticipation of interest rate hikes to control inflation can erase a mortgage REIT's profit margin.

Annaly Capital Management has navigated interest rate swings in the past without burning shareholders and will most likely continue to do so. Adding some shares of this stock to your portfolio now, and reinvesting the dividends could provide heaps of income to fuel your retirement dreams. 

Investor going over finances.

Image source: Getty Images.

Bristol Myers Squibb

Bristol Myers Squibb (BMY -0.40%) shares are down about 19% from a 52-week high they reached this summer. Now, this pharmaceutical stock offers a juicy 3.5% dividend yield that could grow by leaps and bounds in the years ahead. 

After some big gains in 2020, the stock market has been generally uninterested in biopharmaceutical stocks this year. Bristol Myers Squibb has been falling particularly hard in response to disappointing write-offs related to its $74 billion Celgene acquisition in 2019. 

Investors are also worried because Bristol Myers Squibb's lead product, Revlimid, could begin facing limited generic competition next year and full-blown generic competition in 2026. Shareholders will notice the company has invested heavily in preparation for Revlimid's eventual implosion and its working. Its new product portfolio contains six recently launched drugs, including Reblozyl, an anemia treatment the FDA approved in 2020. Reblozyl sales finished the third quarter of 2021 at an annualized run rate of $512 million.

Luckily for its shareholders, Bristol Myers Squibb isn't having any trouble raising its quarterly dividend payment. The drugmaker needs less than one-third of the free cash flow its operation generated over the past year to meet its dividend obligation.

Investors have seen their payouts rise by 25% over the past five years and the company's generating enough cash to go higher. Add it all up and this looks like one of the best dividend stocks you can buy now.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bristol Myers Squibb. The Motley Fool recommends Viatris Inc. The Motley Fool has a disclosure policy.

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