Dividend stocks are worth serious consideration, especially given the current state of the economy. With inflation near 40-year highs in the U.S., dividends can be a source of supplemental income for those who need it. And since the rise in prices can eat into investors' returns, opting for automatic dividend reinvestment can help fight off the harmful effects of inflation on your portfolio.
But what's even better than dividend stocks? Cheap dividend stocks. Let's look at two companies to consider -- both of which are excellent, dividend-paying companies and look like steals at current levels: AbbVie (ABBV 0.89%) and Bristol Myers Squibb (BMY 0.43%).
1. AbbVie
Pharma giant AbbVie offers a dividend yield of 4.01%, significantly higher than the S&P 500's average of 1.27%. In addition, the company is a Dividend King, which means it has raised its payout for at least 50 consecutive years. The company's total revenue for the third quarter increased by 11.2% to $14.3 billion.
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Equally important, AbbVie's business remains strong. First, the company's rheumatoid arthritis medicine Humira continues to generate growing sales despite competition from biosimilars in Europe. During the third quarter, global sales of Humira came in at $5.4 billion, a 5.6% increase compared to the year-ago period.
AbbVie also boasts several products that will eventually replace Humira once it loses patent exclusivity in the U.S. next year. These include Rinvoq and Skyrizi, two medicines that treat several autoimmune disorders. Both are seeing sales increase rapidly. In the third quarter, Rinvoq's revenue more than doubled year over year to $453 million while Skyrizi's sales soared by 83% to $796 million.
Other vital products for AbbVie's future include its cancer medicine Venclexta as well as its Botox franchise. Meanwhile, the company boasts a pipeline with several dozen ongoing clinical trials. Even a handful of approvals -- which seems more than likely than not -- should help the company bolster its lineup with label expansions or brand-new products.
The need for lifesaving medicines won't go out of style soon, which is what makes AbbVie's business resilient to economic conditions. The company may face headwinds as every business does, but in the long run it is well-positioned to reward shareholders by way of dividend increases and strong stock market performances.
AbbVie is currently trading for just 9.5 times forward earnings compared to the pharmaceutical industry's average price-to-earnings (P/E) ratio of 12.9. At these levels, AbbVie's stock looks attractively valued. Investors looking for companies whose shares to hold for a long time should look no further than this top pharma stock.
2. Bristol Myers Squibb
Bristol Myers is another drugmaker that provides both value and income. With a dividend yield of 3.21% and a forward P/E of 8, the company is above-average in both categories. Bristol Myers' business looks strong, too, with a raft of medicines that generate robust, growing sales. In the third quarter, the company's revenue grew by 10% year over year to $11.6 billion.
The company had several drugs to thank for that performance, especially oncology products Opdivo and Revlimid and anticoagulant Eliquis. However, all three of these products will be facing patent expiration relatively soon. Revlimid will start facing some generic competition in the U.S. this year while Opdivo and Eliquis will lose patent exclusivity in the U.S. in 2028 and 2026, respectively.
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Thankfully, Bristol Myers has a plan to deal with these headwinds. The company expects that its portfolio of newer products will contribute between $20 billion and $25 billion in revenue in the coming years. Some of the most promising of the bunch include anemia treatment Reblozyl, which could generate more than $4 billion in annual sales by 2029, according to the company. Reblozyl was first approved by the U.S. Food and Drug Administration in 2019.
Other promising products include mavacamten, a potential treatment for a heart condition known as symptomatic obstructive hypertrophic cardiomyopathy. Mavacamten could earn regulatory approval this year, and Bristol Myers also expects it to generate annual sales of at least $4 billion eventually.
Yet another product Bristol Myers is working on is deucravacitinib, a potential treatment for plaque psoriasis that could earn the green light from regulators in the U.S. and Europe sometime this year. These new medicines will only add to other drugs in Bristol Myers' lineup.
That's why despite the revenue losses it will soon experience due to biosimilar competition for some of its best-selling medicines, the company remains an excellent long-term bet.
