There are exciting investing trends sweeping through Wall Street right now, including artificial intelligence (AI). While it's a great idea to try to capitalize on this rapidly growing field by buying shares in some of the leaders in the AI industry, you shouldn't give up on tried and true approaches to earning superior returns over the long run. One of them is income investing.
Dividend stocks -- especially those that routinely increase their payouts -- tend to have solid businesses and the ability to overcome obstacles, which generally allows them to perform well given a sufficiently long time horizon. Of course, not every dividend stock is worth investing in, but let's consider two that are: Bristol Myers Squibb (BMY 0.10%) and Johnson & Johnson (JNJ 0.31%).
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1. Bristol Myers Squibb
Bristol Myers Squibb has struggled over the past few years due to patent cliffs. And to make matters worse, it will soon face even more, including for two of its best-selling medicines, cancer drug Opdivo and anticoagulant Eliquis, both of which will lose patent exclusivity by the end of the decade.
The good news is that BMS has launched newer products that should help it return to top-line growth after the dust settles. These include a subcutaneous version of Opdivo, which received approval late last year. Newer medicines, such as Reblozyl for anemia in beta-thalassemia patients, should also contribute to sales growth for a while.
NYSE: BMY
Key Data Points
In the third quarter, total revenue increased by 3% year over year to $12.2 billion. The company's growth portfolio, primarily composed of newer launches, reported $6.9 billion in sales, an 18% increase compared to the year-ago period.
BMS is doing what it's supposed to do to navigate patent cliffs. The company still has more to look forward to, with dozens of products in the pipeline that will yield even more brand-new approvals, particularly in the oncology market. One of them is BNT327, a medicine the company is developing in collaboration with BioNTech that could challenge the world's leading cancer drug, Keytruda.
Bristol Myers Squibb's prospects remain strong, and the dividend is still attractive. The stock now offers a forward yield of 5.1% and the company has increased its payouts by 63.2% over the past decade. If you're an income-seeking investor, you should be able to safely add this stock to your portfolio.
2. Johnson & Johnson
The past few years haven't been easy for healthcare giant Johnson & Johnson, either: It has encountered patent cliffs, legal challenges, and the threat of government drug-price negotiations. Considering all that, the pharmaceutical leader has performed well. Third-quarter sales jumped by 6.8% year over year to $24 billion.
Although these potential obstacles remain, there are several reasons J&J's long-term outlook is bright. Let's consider two.
First, it could circumvent the direct challenges to sales growth (especially drug-price negotiations) through innovation. Johnson & Johnson routinely earns new approvals or label expansions within its pharmaceutical business and medtech division. In the former, the company recently launched Imaavy, a medicine that received approval for myasthenia gravis (a chronic disease causing muscle weakness) in April.
NYSE: JNJ
Key Data Points
In medtech, Johnson & Johnson received clearance for the Virtuguide System, designed to assist physicians in performing Lapidus procedures (surgeries to fix a bunion, a painful bump on the big toe), earlier this year. The Virtuguide uses AI-powered software to analyze each patient and craft personalized recommendations. J&J's ability to innovate should allow it to continue performing well, despite recent challenges to its business.
Second, the company has an incredibly strong balance sheet. Johnson & Johnson has the highest credit rating available, even higher than that of the U.S. government, which speaks volumes as to its ability to handle its obligations and potential fallout from legal problems.
Also note that Johnson & Johnson is a Dividend King -- a company that has raised its payouts for at least 50 consecutive years. Even in this elite group, Johnson & Johnson is one of the more impressive, with its streak currently standing at 63 years.
This is about as safe as dividends come. Johnson & Johnson is an excellent income stock to hold onto for a while.
