The S&P 500 index (^GSPC 1.22%) is offering a tiny 1.1% dividend yield today. The average pharmaceutical stock yields around 1.7%. Bristol Myers Squibb (BMY 1.47%), however, is offering investors a yield of 4%. If you're a dividend investor looking to build a million-dollar nest egg, you might want to take a closer look at this drugmaker.
What does Bristol Myers Squibb do?
Bristol Myers Squibb is one of the world's largest pharmaceutical companies. The sector is very competitive, and the cost of developing novel drugs is extremely high. That said, Bristol Myers Squibb has a long and successful track record. However, right now, it isn't operating in the spotlight.
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Investors are currently enamored of GLP-1 weight-loss drugs. There's a good reason for that, since weight loss is a huge market. However, Wall Street has a habit of getting myopically focused on one thing and ignoring other opportunities. Bristol Myers Squibb, for example, is focusing on cardiovascular, cancer, and immune-related medicines -- all very important healthcare opportunities.
Bristol Myers Squibb is facing normal headwinds
The stock is roughly 25% below its late 2022 highs, which is part of the attraction. There's still some recovery opportunity to go along with a well-above-average dividend yield. The payout ratio is around 70%, which is not so high that investors should be overly concerned. The company has a long history of regularly increasing its dividend, and when times are tough, the board of directors keeps dividends steady.
NYSE: BMY
Key Data Points
Bristol Myers Squibb's Opdivo cancer drug will lose patent protection in 2028. It's an important medication, and investors are concerned. However, the company is working on a different delivery method for Opdivo, which could extend its patent protections. And there are other drugs in the development pipeline as well.
It's important to recognize that patent expirations are a normal part of a drug company's business. Bristol Myers Squibb has proven over time that it can deal with them as they come along.
A foundation for growth
The big opportunity here is buying an out-of-favor stock while it offers a relatively high yield, and letting it compound through dividend reinvestment. That's how this stock can help you turn $100,000 into a $1 million retirement nest egg.
Bristol Myers Squibb shouldn't be the only stock you buy, but it can provide a strong foundation for a more diversified portfolio. Essentially, owning this reliable dividend stock can let you take on more risk elsewhere.
