Beat the S&P 500 With This Cash-Gushing Dividend Stock

Investors seeking relief from stock market volatility should take a closer look at Bristol Myers Squibb (NYSE: BMY). At the time of writing, shares of the healthcare giant have climbed 4% year to date -- a notable outlier amid the broader stock market sell-off, with the S&P 500 index currently down nearly 10% from its peak.

Better-than-expected financial results in recent quarters have signaled an improved outlook, helping to sustain the rally. Even more appealing is Bristol Myers Squibb's 4% dividend yield, making it an excellent choice for investors seeking regular portfolio income.

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Here's why this cash-generating biopharmaceutical leader is poised to continue outperforming the S&P 500.

Strength in diversification

Bristol Myers Squibb has a long history of innovation, having developed multiple life-changing blockbuster drugs in oncology, immunology, and cardiovascular diseases. Notable products include Eliquis, a blood thinner used to prevent stroke and blood clots, and Opdivo, a leading immunotherapy for several types of cancer.

The company's scale and diversified portfolio of more than 30 marketed products, along with an even larger clinical pipeline, underscore the appeal of its stock as an investment. However, one of the company's key challenges is the expiration of drug patents, which allows competitors to introduce generic alternatives, potentially disrupting sales and earnings.

For instance, Revlimid, a medication for multiple myeloma and lymphoma, lost its market exclusivity in 2022. Its sales declined from a peak of $12.8 billion in 2021 to $5.8 billion last year. Chemotherapy drug Abraxane and leukemia medication Sprycel have faced a similar revenue decline due to competition from generics.

Momentum from advanced growth portfolio

Bristol Myers Squibb is actively replacing lost revenue with a new generation of therapeutics launched in recent years.

In 2024 (for the year ended Dec. 31), net revenue increased by 7% compared to 2023, driven by the strong momentum of its newer growth products, which offset declines in its legacy portfolio. New indications for Opdivo, along with increasing market adoption of brands such as Cobenfy, Camzyos, and Breyanzi, propelled growth portfolio sales up 21% year over year in the fourth quarter.

While the weaker legacy portfolio is expected to continue weighing on top-line revenue, recent trends reinforce confidence in Bristol Myers Squibb's long-term growth trajectory.

Image source: Getty Images.

A well-supported dividend

For 2025, Bristol Myers Squibb is targeting full-year revenue of approximately $45.5 billion, with earnings per share (EPS) projected between $6.55 and $6.85, reflecting strong underlying profitability.

Efforts to enhance operational efficiencies and control costs should drive earnings growth over the next several years. Additionally, multiple clinical updates and pivotal data milestones in the coming years could act as catalysts for the stock. By 2030, company management expects to secure approval for 10 or more new molecular entities and introduce at least 30 life cycle management indications for existing products, extending their commercial viability while bolstering cash flows.

This outlook bodes well for shareholders focused on the sustainability of Bristol Myers Squibb's $0.62 quarterly dividend, which yields 4.1%. With an annual dividend payout ratio below 40% relative to the midpoint of the company's 2025 EPS guidance, the company appears to have ample financial flexibility to support its dividend.

Management has reaffirmed its commitment to maintaining the dividend, which has been increased annually for 16 consecutive years. Additionally, Bristol Myers Squibb has $5 billion remaining under its share-repurchase authorization, further reinforcing its shareholder-friendly capital allocation strategy.

BMY Dividend Yield data by YCharts.

The big picture for investors

Bristol Myers Squibb offers a compelling combination of long-term growth potential and value with its robust pipeline, strong financials, and generous dividend. The stock is notably trading at just 9 times its consensus 2025 EPS estimate, representing a compelling valuation discount compared to the earnings multiple for industry peers such as Merck, trading at a forward P/E of 10 and Amgen, whose multiple is closer to 15.

In my view, Bristol Myers Squibb is well-positioned to outperform the S&P 500 index with a stronger return this year. Even if its stock price doesn't surge higher immediately, investors are getting paid to wait with the company's generous dividend, worthy of buying for a diversified portfolio.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amgen, Bristol Myers Squibb, and Merck. The Motley Fool has a disclosure policy.