BRISTOL-MYERS SQUIBB CO (NYSE:BMY) – A High-Yield Dividend Stock with Strong Profitability and Financial Health

Dividend investors frequently look for a mix of high yield, sustainability, and financial stability. A useful method to find such stocks involves using a screening tool that picks companies with strong dividend ratings while also showing good profitability and financial health. The "Best Dividend Stocks" screen on ChartMill follows this approach, choosing stocks with a ChartMill Dividend Rating of 7 or more, a Profitability Rating of 5 or higher, and a Health Rating of at least 5. These standards help confirm that the chosen companies not only provide appealing yields but also have the financial foundation to maintain and increase their dividends.

BRISTOL-MYERS SQUIBB CO (NYSE:BMY) emerges as a strong option under this screening method. The company, a global biopharmaceutical leader, has shown a mix of steady dividend payments, good profitability, and reasonable financial health, important qualities for investors focused on income.

Why BMY Suits Dividend Investors

1. Appealing Dividend Yield and Growth

BMY currently provides a dividend yield of 5.06%, much higher than both the industry average (3.99%) and the S&P 500 (2.32%). This makes it an attractive choice for income-seeking investors. Beyond the current yield, the company has a solid history of dividend growth, with an average yearly rise of 11.67% over the last five years. BMY has also kept up steady payouts for at least ten years, strengthening its reputation as a dependable dividend stock.

Still, investors should be aware that BMY’s payout ratio (90.59%) is relatively high, which could be a concern if earnings drop. However, the company’s earnings growth has been faster than dividend growth, offering some buffer.

2. Solid Profitability Backs Dividend Stability

BMY’s Profitability Rating of 7 highlights its ability to produce strong returns:

• Return on Equity (ROE) of 31.16% puts it in the top 6% of its industry.
• Operating Margin of 27.11% beats 93% of pharmaceutical competitors.
• Gross Margin of 74.69% is much higher than the industry average.

These figures indicate that BMY has enough earnings capacity to keep up its dividend, even with a high payout ratio.

3. Financial Health: A Balanced View

With a Health Rating of 5, BMY displays both strengths and areas to watch:

• Debt Management: The company’s Debt-to-FCF ratio of 3.80 is favorable, meaning it could clear its debt in less than four years using free cash flow—a positive signal for solvency. However, its Debt-to-Equity ratio of 2.67 is elevated, showing reliance on debt.
• Liquidity: BMY’s Current Ratio (1.28) and Quick Ratio (1.17) are acceptable but trail some industry peers, indicating tighter working capital management.

While not perfect, BMY’s financial health is enough to support its dividend in the short to medium term, especially given its strong cash flow.

4. Valuation: An Undervalued Stock with Income Appeal

BMY trades at a P/E ratio of 6.26, far below both the industry average (23.46) and the S&P 500 (27.61). Its forward P/E of 7.48 also suggests it is undervalued compared to growth projections. For dividend investors, this mix of low valuation and high yield can be enticing, assuming the business stays stable.

Final Thoughts for Dividend Investors

BMY’s high yield, consistent growth, and strong profitability make it a notable pick for dividend portfolios. While the high payout ratio and debt levels need attention, the company’s cash flow and industry standing offer a reasonable safety net.

For investors interested in discovering more high-quality dividend stocks, the Best Dividend Stocks screen provides a selected list of similarly appealing options.

Disclaimer: This article is not investment advice. Always do your own research or consult a financial advisor before making investment decisions.