The pharmaceutical industry is well-positioned for growth due to advanced technologies such as AI, the ever-rising need for quality healthcare, the prevalence of chronic diseases, an increasing elderly population, and the growing demand for novel drugs.
Pharmaceutical stocks have been investor favorites. Consistent demand for medicines and therapies makes pharmaceutical companies more resilient to economic cycles. Dividend-paying pharmaceutical stocks have also proven popular among investors, as they offer a steady source of income during uncertain economic times and provide substantial growth opportunities.
Pharmaceutical companies have ample growth opportunities as several drugs are under development. Moreover, entry into newer geographies and approval of novel drugs offer significant growth opportunities.
Their consistent growth helps mitigate the impact of inflation and demonstrates confidence in the company's ability to attract and retain investors even during turbulent economic conditions.
With the incorporation of AI, the Internet of Things, and big data analytics, clinical trial timelines and supply chain efficiency are significantly sped up and enhanced. This helps revolutionize drug discovery and development and ensures continued innovation. The global pharmaceutical market is projected to grow at a 6.1% CAGR, reaching $2.36 trillion by 2030.
Given this backdrop, let’s compare two Medical - Pharmaceuticals stocks, Pfizer Inc. (PFE) and Bristol-Myers Squibb Company (BMY), to understand why BMY offers better dividend stability and growth than PFE.
The Case for Pfizer Inc. Stock
Pfizer Inc. (PFE) discovers, develops, manufactures, markets, distributes, and sells biopharmaceutical products in the U.S., Europe, and internationally.
PFE’s stock has declined 25.2% over the past year but gained 9.9% over the past month to close the last trading session at $28.88.
On April 29, 2024, PFE and Genmab A/S announced that the FDA approved their supplemental Biologics License Application for TIVDAK to treat recurrent or metastatic cervical cancer. TIVDAK is the first antibody-drug conjugate with proven overall survival benefits to receive full FDA approval for this condition.
In terms of forward EV/EBIT, PFE is trading at 13.20x, 17.6% lower than the industry average of 16.03x. On the other hand, the stock’s forward EV/Sales of 3.67x is 5.1% higher than the industry average of 3.49x.
PFE’s trailing-12-month asset turnover ratio of 0.26x is 34.5% lower than the industry average of 0.40x. However, its trailing-12-month EBITDA margin and levered FCF margin of 17.53% and 6.31% are 202.5% and 398.5% higher than the industry averages of 5.79% and 1.27%, respectively.
Over the past three years, PFE’s revenue grew at a CAGR of 6%. Conversely, its EBITDA shrunk at a CAGR of 16% during the same period.
PFE has been paying dividends to its shareholders for the past 34 years. Its annualized dividend of $1.68 per share translates to a dividend yield of 5.82% on the current share price. Its four-year average yield is 4.06%. Over the past three and five years, PFE’s dividend payments have grown at CAGRs of 3.4% and 4.6%, respectively.
PFE’s total revenues for the fiscal first quarter that ended March 31, 2024, declined 19.5% year-over-year to $14.88 billion. Moreover, its adjusted net income attributable to PFE common shareholders and earnings per common share stood at $4.67 billion and $0.82, down 33.6% and 33.3% from the year-ago quarter, respectively.
Analysts expect PFE’s revenue for the quarter ending June 30, 2024, to increase 2.5% year-over-year to $13.05 billion. Its EPS for the same quarter is expected to decline 32.3% year-over-year to $0.45. The company surpassed consensus EPS estimates in each of the trailing four quarters.
PFE’s mixed fundamentals are reflected in its POWR Ratings. It has an overall C rating, equating to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has a C grade for Growth, Value, Momentum, Stability, and Quality. Within the Medical - Pharmaceuticals industry, PFE is ranked #65 out of 158 stocks. To see the PFE’s rating for Sentiment, click here.
The Case for Bristol-Myers Squibb Company Stock
Bristol-Myers Squibb Company (BMY) discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide.
BMY’s stock has declined intraday to close the last trading session at $41.24.
On May 16, 2024, BMY announced that the FDA granted accelerated approval for Breyanzi, a CAR T cell therapy, for treating adults with relapsed or refractory follicular lymphoma (FL). It is also listed in the National Comprehensive Cancer Network Guidelines for B-cell Lymphomas as a therapy for relapsed or refractory FL.
In terms of forward Price/Sales, BMY is trading at 1.81x, 49% lower than the industry average of 3.55x. The stock’s forward EV/Sales of 2.84x is 18.5% lower than the industry average of 3.49x.
BMY’s trailing-12-month gross profit margin of 76.03% is 33.3% higher than the industry average of 57.06%. Likewise, its trailing-12-month EBIT margin and levered FCF margin of 18.30% and 35.95% are considerably higher than the industry averages of 1.35% and 1.27%, respectively. On the other hand, its 2.67% trailing-12-month Capex / Sales is 26.8% lower than the industry average of 3.65%.
Over the past three and five years, BMY’s revenue grew at CAGRs of 2.1% and 14.4%, respectively. Similarly, its EBIT grew at a CAGR of 3.1% over the past three years.
BMY has been paying dividends to its shareholders for the past 34 years. Its annualized dividend of $2.40 per share translates to a dividend yield of 5.82% on the current share price. Its four-year average yield is 3.30%. Over the past three and five years, BMY’s dividend payments have grown at CAGRs of 7.6% each.
For the fiscal first quarter that ended March 31, 2024, BMY’s total revenues increased 4.7% year-over-year to $11.87 billion. Its non-GAAP gross profit rose 1.5% from the year-ago quarter to $8.96 billion. As of March 31, 2024, BMY’s total assets amounted to $99.03 billion, compared to $95.16 billion as of December 31, 2023.
Street expects BMY’s EPS for the quarter ending June 30, 2024, to decrease 3.8% year-over-year to $1.68. Its revenue for the same quarter is expected to increase 2.4% year-over-year to $11.50 billion. BMY surpassed the Street EPS and revenue estimates in three of the trailing four quarters, which is impressive.
BMY’s robust prospects are reflected in its POWR Ratings. It has an overall A rating, equating to a Strong Buy in our proprietary rating system.
BMY has an A grade for Value and a B for Growth. It is ranked #10 within the same industry. Click here to see BMY’s Momentum, Stability, Sentiment, and Quality ratings.
PFE vs. BMY: Which Pharma Stock Offers Better Dividend Stability and Growth?
The pharmaceutical industry is poised to witness robust growth due to the increasing integration of advanced technologies, sustained demand for quality healthcare, growing demand for precision drugs, and higher investments in R&D. Both PFE and BMY are well-positioned to capitalize on these positive industry trends.
Despite PFE’s low beta and solid dividend payout history, BMY's strong financials, solid dividend yields, consistent dividend payouts, impressive historical growth metrics, and discounted valuation make it a better investment choice than PFE.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Medical - Pharmaceuticals industry here.
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PFE shares were trading at $28.29 per share on Tuesday morning, down $0.59 (-2.04%). Year-to-date, PFE has gained 1.25%, versus a 11.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
Dividend Stability and Growth in Pharma: Pfizer (PFE) vs. Bristol-Myers Squibb (BMY) StockNews.com
