1 Warren Buffett Stock for Dividend Investors

Bristol Myers Squibb is a publicly-traded global pharmaceutical company. Founded 135 years ago, the company has expanded into a massive conglomerate. Indeed, it currently ranks in the S&P100, making it one of the largest drug companies in the world. Bristol Myers Squibb (BMY) is also a favorite of Warren Buffett and we’ll explain why below.

Recent Earnings Call and Macro Trends

BMY has a variety of factors that have made many pay even more attention to it than usual of late. Recently, Bristol Myers Squibb management held its earnings call for the 4th quarter of 2021.

The call was roughly in-line with market consensus, with BMY meeting its estimated $1.83 EPS and posting quarterly revenue of $11.99 billion. The revenue numbers beat consensus estimates by a smidge, making it roughly in line with previous estimates. 

On the whole, 2022 has been kind to BMY: The stock has outperformed the entire S&P 500. This has come despite widespread market fluctuations.

Some have theorized that the turbulent moment for the stock market has been good for the big pharma conglomerate. During times of high inflation – which we are currently in now – investors tend to flock towards safer stocks, such as those in the healthcare sector.

Blue-chip health care investments do well and are viewed as safer bets. Furthermore, inflation obviously changes consumer spending patterns, forcing people to put more of their money into necessary expenditures, such as healthcare.

It is also worth noting that inflation is absolutely clobbering some markets but not others. Prescription drugs – including those produced by BMY – have only increased 1.3% over the past 12 months. That number is well below the rate of inflation.  

Finally, BMY continues to offer a relative health dividend of $0.54 a share. The yield of this dividend hovers around 3.2%. The dividend as held even or increased every year since at least 2011. This steady dividend increase shows that the company remains solidly committed to increasing its share. 

Company Achievements

On its recent earnings call, Bristol Myers Squibb’s CEO, Giovanni Caforio, cited numerous company achievements as optimistic business trends. This included:

• “Accelerated Growth” of Opdivo, an FDA-approved drug that is used to treat cancer in the lining of the urinary tract.
• The launch of Zeposia in the United States and recent grant of European approval for treatment. Zeposia is used to treat ulcerative colitis and certain forms of multiple sclerosis.
• Expanding demand for a variety of other drugs, including Reblozyl, Breyanzi and Abecma. 
• Continued advancement into a variety of other medical areas, including heart treatment conditions, additional markets, and more.
• Eliquis, a drug used to treat deep vein thrombosus and pulmunary embolisms.

In total, the company saw revenue increase in percentage terms to the “high single digits” versus the prior year. This helped to grow the stock by 10.77% in 2021.

A further examination of their fundamentals reveals additional positive trends: Revenue and net income grew every quarter in 2021. Indeed, in total, the company’s financial position showed marked improvements in almost every area compared with the previous year. This included revenue (8.29% increase), net income (123.66%), diluted earnings per share (124.04%), and operating income (90.53%). 

Going forward, the company foresees continued revenue growth and increased its revenue projections for the coming years. This continued projected growth is anticipated because of favorable projected increases in multiple metrics that includes: 

• demand for already existing drugs,
• expansion into new markets, and
• an expansion of drugs that will be available for consumer purchase.  

Another plus for investors is that Bristol Myers Squibb has been repurchasing company shares. It recently increased its share repurchasing to $15 billion. Doing so is believed to have a positive impact on their stock price. $5 billion of that repurchase will be on an accelerated share buyback, a program that the company is executing with Citibank, JP Morgan, Morgan Stanley, and Barclays. 

The market responded favorably to the earnings call, with the stock price increasing. BMY share price has increased about 5% since its earnings were announced. 

Bristol Myers Squibb Analysts Ratings

A Barron’s review of analysts’ ratings shows that most who follow the BMY stock have a stable or positive picture of the expected performance.

Of 22 analysis who follow and rate the stock, 10 rate it as a Buy, 2 as Overweight, and 10 a Hold. This puts the consensus of the stock solidly in the “buy” category. The 12-month consensus of the stock price is $72. 

The analysts ratings have remained remarkably consistent over the past few months, showing barely any movement. This reiterates the idea that BMY stock remains a solid and stable investment, particularly if investors are interested in investing in the pharmaceutical sector.  

Warren Buffett Buy

Perhaps the most compelling piece of analysis is who the buyers of BMY include: Warren Buffett. 

In February, an article came out that noted Buffett’s past purchase of BMY. The article cited many reasons that made the BMY timing appropriate: A turbulent economy and inflation were chief among them. Furthermore, BMY offers a variety of drug therapies that will likely be needed down the line.  

The stock also figured into Buffett’s buying pattern of buying stocks on the cheap: BMY cash flow, earnings, and book value are all below where they are forecast to be over the next five years.

As noted above, BMY currently has strong upside potential in the long term, fueled largely by its expanded markets and drug portfolio. As such, the purchase of BMY now could pay major dividends over the long-term. 

So…Is It On Sale?

BMY’s fundamentals are solid. It continues to meet or exceed profit growth, and it clearly has a variety of new therapies and markets that are opening up in the future. It has significant growth potential, and some of the most value-oriented buyers in the world – including the Oracle of Omaha – have made investments in the stock. 

Is BMY on sale? The answer for that seems to depend on your time horizon. It presents a solid (but not spectacular) investment now. However, it seems likely that the stock is primed for major growth in the next five years. As such, under the current conditions, it seems ready to show major growth over that time frame and may be considered “on sale” for longer-term investors. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.