The S&P 500 index is up by about 16% so far this year. Many of the index's dividend payers have raised their payouts, but not nearly as much as their stock prices have risen. As a result, the average dividend-paying stock in the benchmark index offers a paltry 1.3% yield at recent prices.
Luckily, there are still a handful of top dividend payers trading for low enough prices to offer high yields. Here's why they could be great buys for most income-seeking investors right now and look like no-brainer holds for at least a decade.
1. Bristol Myers Squibb (~$50 per share)
Bristol Myers Squibb(NYSE: BMY) is a big pharmaceutical company that isn't selling weight-management drugs. The lack of popular obesity treatments is partly responsible for pulling the stock down by about 4% this year.
Shares of Bristol Myers Squibb offer a juicy 4.9% yield at recent prices. With total sales that rose by 9% in the second quarter, there's an excellent chance the company will maintain its 15-year dividend-raising streak for at least another decade.
In the plus column, Bristol Myers Squibb could soon begin marketing a new treatment for patients with schizophrenia and other forms of psychosis. In 2023, it acquired KarXT, a still experimental treatment that could become the first antipsychotic drug that doesn't block dopamine receptors. Clinical trial results suggest this new mode of action leads to fewer side effects.
Today's antipsychotic drugs generate blockbuster sales even though they have side effects that include sleepiness and weight gain. However, those side effects lower compliance and physicians are clamoring for a solution that's easier for patients to live with. The FDA is currently reviewing an application for KarXT and expects to issue an approval decision next month.
2. Dow Inc. (~$54 per share)
Dow Inc.(NYSE: DOW) offers an eye-popping 5.2% dividend yield at recent prices, but there's a catch. The leading chemicals company hasn't raised its payout since spinning off from DuPont de Nemours in 2019.
While Dow hasn't been raising its dividend lately, investors can at least rely on steady payments. The company recently announced its 452nd consecutive quarterly dividend payment.
Macroeconomic conditions haven't been ideal for the basic materials company, but it appears the worst may be over. In the second quarter, Dow reported net sales that declined year over year but rose slightly compared to first-quarter results.
Downstream plastic prices in Asia have been a problem, but Dow's ability to manufacture chemicals at a lower price point than smaller competitors is a durable advantage. It might not happen in 2024, but patient investors can reasonably expect significant dividend raises down the road.
3. CVS Health (~$59 per share)
CVS Health(NYSE: CVS) is famous for its chain of retail pharmacies, but this is a relatively small part of its vertically integrated business. In 2018 it acquired Aetna, an insurer that collects healthcare premiums from around 39 million people.
In addition to Aetna, CVS Health benefits from the integration of its pharmacy benefits management (PBM) business. A whopping 34% of all prescriptions filled last year were managed by CVS Health's PBM.
After falling about 19% so far in 2024, CVS Health stock offers a nice 4.6% dividend yield. The shares are under pressure because management has lowered its earnings expectation for 2024 downward twice this year. New rule changes lowered star ratings for its Medicare Advantage plans, and the company will lose billions in rating-related bonuses it used to receive from the government. While it probably won't happen in 2024, it's just a matter of time before the company's Medicare Advantage plans are eligible for bonuses again.
CVS has more than doubled its dividend payout over the past 10 years. With a unique collection of integrated healthcare businesses that give it a leg up on competitors, another decade of big payout raises seems likely.
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Cory Renauer has positions in CVS Health. The Motley Fool has positions in and recommends Bristol Myers Squibb. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.
