Is It Too Late to Buy These 2 Brilliant Passive Income Stocks?

Dividends never go out of style, but some dividend stocks can. That's how some investors might feel about Pfizer (PFE 0.55%) and Bristol Myers Squibb (BMY 0.34%) these days. Both companies have generally maintained solid dividend programs, but right now they both face issues with slow or nonexistent revenue and earnings growth.

Pfizer and Bristol Myers Squibb have severely underperformed the S&P 500 over the past 12 months, and if these issues persist, things could get worse. Let's find out whether it's too late to buy shares of these passive income stocks.

1. Pfizer

Two years ago, Pfizer became the first company in the biopharma industry to hit $100 billion in annual sales. Things have changed dramatically since then. The drugmaker's COVID-19 portfolio, which fueled its record-breaking sales run, lost steam as the pandemic receded. Last year, revenue and earnings dropped off a cliff. This could affect its dividend program.

Unless the company can turn things around, management could change its capital allocation priorities and reduce its dividend payments. However, Pfizer is well on its way to staging a comeback. The first step in its plan was to earn a good number of brand-new approvals. Last year, they numbered seven, more than twice as many as any other company in the industry.

Some of these brand-new products were pretty groundbreaking, too. For instance, Pfizer launched one of the first vaccines for the respiratory syncytial virus (RSV) to ever get the green light from the U.S. Food and Drug Administration.

Pfizer also decided to beef up its pipeline. It acquired Seagen, a cancer specialist, for $43 billion -- a move it could afford partly thanks to its coronavirus-related success. Seagen was already a highly innovative company within its specialized field of oncology. The partnership between the two could produce gems in the future.

It will take some time for Pfizer to recover fully, but the company is on the right track. New products will start contributing meaningfully to sales, its coronavirus vaccine will stop hurting its financial results, and it will produce yet more important medicines and vaccines.

Pfizer has raised its dividend per share by a decent 62% in the past 10 years. The company currently offers a yield of 6.1%. In my view, Pfizer's dividend program is safe, and it's not too late to buy the stock.

2. Bristol Myers Squibb

Bristol Myers Squibb's problems are somewhat similar to Pfizer's. Revlimid, a cancer medicine that used to be the drugmaker's best-seller, lost patent exclusivity about two years ago. Bristol Myers has yet to find a suitable replacement, and its revenue and earnings have been inching higher since -- at best. Thankfully, older products in the company's lineup are still having a positive impact; these include cancer drug Opdivo, one of its longtime growth drivers.

The biotech does also have a lineup of newer medicines approved since 2019. The bad news is that they aren't contributing nearly enough to the top line yet to help revenue growth improve significantly. Last year, the company's new products generated about $3.6 billion in sales, a 77% year-over-year increase.

However, total revenue for Bristol Myers came in at $45 billion, down 2% compared to the previous fiscal year. Major products that have lost patent exclusivity generated $7 billion in revenue, down 34% year over year; Revlimid accounted for $6.1 billion of that, or almost twice the company's entire new product portfolio.

Here's the good news. These older products will almost completely phase out of results within three years, while newer products grow in prominence and continue growing their sales for a long time. In the meantime, Bristol Myers should also launch other brand-new products.

The company's issues are nothing out of the ordinary in the biotech industry. Patient investors who stay the course have good reasons to trust that it can make a comeback while keeping its dividend healthy and growing. The drugmaker has increased its payouts by some 67% in the past decade; its dividend yield currently tops 4.8%. For dividend seekers, Bristol Myers Squibb still looks like a good pick.