These 2 Stocks Just Declared Dividend Raises That Kick In Next Year. Should You Buy?

It isn't easy to find steady and reliable dividend payers in the pharmaceutical industry. The key reason is simple: Drug development is a frequently laborious and expensive process that can swallow vast amounts of capital.

Yet there is a clutch of companies at the top of the industry not only paying distributions regularly, but also lately increasing them on a consistent basis.

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Two of these, Bristol Myers Squibb (NYSE: BMY) and Eli Lilly (NYSE: LLY), just declared dividend raises. What's more, since the new payouts will represent the two companies' first dividends of 2025, there's still time for investors to take advantage of them. Here's a brief look at both dividend raises, and whether the companies behind them are worthy of buying for your portfolio.

1. Bristol Myers Squibb

You would be hard-pressed to find a pharmaceutical sector dividend that's as reliable as that of Bristol Myers Squibb's. The company has been doling out a shareholder distribution for 93 years. Topping that, it has lifted that payout for 16 years in a row.

No. 16 was declared in mid-December: a quarterly dividend raise of 3%, bringing its total payout to $0.62 per share.

It's good that the company is such a steady payer and hiker, because its underlying business hasn't exactly been red-hot. A pair of blockbuster cancer drugs, Revlimid and Abraxane, began falling off the patent cliff in 2022, and not coincidentally, the company's annual sales dipped in both that year and in 2023.

This has been mitigated lately by a pair of top performers, Opdivo (another cancer drug, approved for multiple indications) and its current No. 1 seller, anticoagulant Eliquis. Demand for the latter in particular has restarted the growth engine; in the company's most recently reported quarter, total revenue zoomed 8% higher year over year to nearly $11.9 billion.

Going from valleys to peaks can be tough even for the most well-capitalized companies, and BMS has loaded up on debt to boost its operations lately. Its long-term borrowings stood at over $50 billion in said quarter, nearly 50% higher than the level of just one year prior. Its debt-to-equity ratio rocketed to 2.9 across that stretch of time, a high number both on its own and when matched against rivals.

Meanwhile, Opdivo and Eliquis will face the end of patent exclusivity in the waning years of this decade, so the company will be under pressure to either develop or acquire new blockbusters to at least fill the gap. While it has had success with both paths, neither is easy or cheap for even the most prominent pharmaceutical companies. Investors should approach this stock with some care, then.

I say that even though Bristol Myers Squibb is quite a generous dividend payer, on top of its other qualities as an income stock. The company's upcoming distribution will be handed out on Feb. 3, 2025, to investors of record as of the preceding Jan. 3. At the most recent closing share price, it would yield 4.4%.

2. Eli Lilly

These days, Eli Lilly seems as if it has the more confident management team -- not least because the company recently declared the latest in a now seven-year series of meaty 15% annual dividend raises, for a new quarterly disbursement of $1.50 per share.

And the board of directors has authorized a new share-buyback program of $15 billion, exactly three times the size of its predecessor. The company said it anticipates the initiative will run over the next three years.

The storied American company is quite a monster on the market these days, with its nearly $710 billion market cap leading the pharma industry. Much of the increase in Lilly's valuation has come on soaring sales of Zepbound, its entry in the ultra-high-demand GLP-1 weight loss drug market.

Zepbound, the company's Mounjaro diabetes treatment approved for obesity, was green-lighted by the Food and Drug Administration (FDA) in November 2023, and it's been wildly popular from the get-go. It and Mounjaro were the key drivers of the company's 20% year-over-year revenue explosion in the third quarter, when it posted a top line of over $11.4 billion.

Lilly is hardly a two-trick pony, though, with a broad and deep portfolio that includes yet another cancer drug, Verzenio. The company also has a strong pipeline, inside of which are two investigational drugs (orforglipron and retatrutide) targeting diabetes and obesity that might prove to be better performers than Zepbound/Mounjaro.

Compared to the rather up-and-down Bristol Myers, Lilly has some real power and momentum pushing it forward. It's already a tough competitor at this early stage of the GLP-1 obesity market, and it does brisk business with a variety of other medicines. The company's stock has been very popular given all of the above, but I think it has even more potential.

Lilly's new payout will be dispensed on March 10, 2025, to stockholders of record as of Feb. 14 the same year. Alas, the stock's popularity has pushed down the dividend yield; even with that latest 15% raise, the shares would pay out at a mere 0.8%.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool has a disclosure policy.