Holding dividend stocks is a great way to navigate turbulent markets. Regular cash distributions can soften the blows of wild price swings, and they can amplify gains over the long term through the power of compounding.

These two well-known benefits of dividend stocks are key reasons these equities rarely trade at a discount. This risk-averse market, however, has created some intriguing opportunities to buy top dividend stocks on the cheap. 

Which dividend stocks are too cheap to ignore right now? Bristol Myers Squibb (BMY -0.71%) and Merck (MRK -0.94%) are both trading at a steep discount relative to their big pharma peers. Here's a breakdown of why savvy investors may want to load up on these ultra-cheap dividend stocks before market sentiment changes direction. 

Bristol Myers Squibb: An overlooked pipeline

BMS stock is presently trading at a monstrous earnings yield of 12%. The big pharma's shares are thus deeply undervalued relative to its immediate peer group (average earnings yield of 7.6%) and risk-free assets such as the 10-year Treasury note.

BMS has failed to garner much in the way of a premium due to concern about its ongoing bout with the patent cliff. The drugmaker recently lost exclusivity for the top-selling cancer drugs Abraxane and Revlimid, and it is set to lose patent protection for the megablockbuster blood thinner Eliquis and cancer immunotherapy Opdivo by decade's end. 

Wall Street, for its part, appears to be missing the broader story with this elite drugmaker. In recent times, Bristol has scored several important regulatory wins, such as the Food and Drug Administration (FDA) approvals for heart failure drug Camzyos, cancer drug Opdualog, immunology medicines Sotyktu and Zeposia, and a suite of high-value hematology therapies.

Even more importantly, Bristol's clinical pipeline sports over 50 early-stage assets under development -- many of which are targeting high-growth opportunities in immunology and cancer. The drugmaker should thus have enough new growth products coming to market to offset these aging stars by 2030.

That being said, Bristol may have to splurge on another bolt-on acquisition to assuage Wall Street's concerns. In the meantime, investors can bank the drugmaker's stellar 3.27% dividend yield while it searches for value-creating business development opportunities at an appealing price point.  

Merck: A company in transition

With an earnings yield of 8%, Merck's shares also seem undervalued right now. Like Bristol's, Merck's lack of a premium stems from concerns about patent expiration. In 2028, the drugmaker is slated to lose patent protection for its breakout cancer drug Keytruda. Keytruda has long been the company's main growth driver. Moreover, this single drug accounted for 35.2% of the company's total annual revenue in 2022. Hence, these concerns are indeed well founded.

But there is more going on here than meets the eye upon first glance. Merck has been busy shoring up its long-term outlook via value-creating business development deals. These transactions ought to lead to the launch of three late-stage trials this year. What's more, Merck has been trialing Keytruda as part of a wide range of combination therapies, a move that could lead to the development of multiple next-gen cancer therapies.   

Again, though, Merck probably has more work to do in putting these patent concerns to rest. And management has admitted as much. Merck, as a result, is expected to engage in more deal-hunting in an effort to expand its pipeline and bring in fresh sources of revenue. While this process plays out, investors can collect the company's above-average dividend yield of 2.68%, which is well covered by its enormous and still growing free cash flows.