3 High-Yield S&P 500 Dividend Stocks Down More Than 25% to Buy Now and Hold for at Least a Decade

The S&P 500 is up an incredible 25% over the past 12 months, but not every stock in the benchmark index has participated in the rally. A handful of terrific healthcare stocks have fallen more than 25% from the peaks they set less than a year ago.

Shares of Pfizer (NYSE: PFE), Bristol Myers Squibb (NYSE: BMY), and CVS Health (NYSE: CVS) are down, but their dividend programs are still going strong. Here’s why investors can rely on these high-yield stocks to keep raising their payouts for at least another decade.

1. Pfizer

Shares of Pfizer are down about 31% over the past 12 months. The pharmaceutical company’s development pipeline is producing new drugs, but the stock market can’t get over how quickly sales collapsed for Comirnaty and Paxlovid, a COVID vaccine and antiviral treatment, respectively.

Despite sinking sales, Pfizer has steadily raised its dividend payout every year since 2009. At recent prices, it offers a huge 6.1% yield, and investors can reasonably look forward to at least another decade of consecutive annual raises.

Combined first-quarter sales of Comirnaty and Paxlovid fell more than 60% year over year to $2.4 billion. Management is predicting further declines for these drugs, but the worst is over, and the dividend is well funded. It expects adjusted earnings per share to land in a range between $2.15 and $2.35, which is more than it needs to meet a dividend commitment currently set at an annualized $1.68 per share.

Pfizer reported first-quarter sales that rose 11% year over year if we exclude Comirnaty and Paxlovid. With nine new drugs approved by the Food and Drug Administration (FDA) in 2023 alone, investors can expect a return to growth that could last throughout the decade ahead.

2. Bristol Myers Squibb

Shares of Bristol Myers Squibb are down about 35% from a high point they reached last summer. At its beaten-down price, the big pharma stock offers a nice 5.7% yield.

The stock has been under pressure lately because management slashed its adjusted earnings outlook to a range between $0.40 and $0.70 from previous guidance of $7.10 to $7.40 per share.

That devastating earnings adjustment is mostly the result of a $14 billion acquisition of Karuna Therapeutics that the company completed in March. The big pharma will record a one-time charge of about $12 billion, but the asset it acquired, KarXT, could be worth it.

The FDA is reviewing an application now that could make KarXT the first new schizophrenia drug that doesn’t directly block dopamine receptors. The agency is expected to announce an approval decision for KarXT on or before Sep. 26, 2024.

Story continues

Shares of Bristol Myers Squibb have been trading for a low valuation of around 7 times trailing free cash flow. Investors who scoop up the beaten-down pharma stock now and hold on have a great chance to see market-beating gains over the long run.

3. CVS Health

We’re all familiar with CVS Health’s leading chain of retail pharmacies. What you might not realize is that it owns one of the three large pharmacy benefit manager businesses and Aetna, a leading health insurer.

Shares of CVS Health have fallen about 27% from a high-water mark set in January. At recent prices, the healthcare conglomerate offers a 4.4% yield, which is unusually high for a stock famous for rapid dividend growth. Vertically integrating different healthcare businesses helped CVS Health raise its dividend payout by 142% over the past decade.

The stock has been beaten down recently due to increasing use of services and lower-than-hoped-for reimbursement rates for its Medicare Advantage members.

Medicare Advantage could become a little less lucrative for CVS Health, but a strong secular tailwind could help its bottom line return to growth. The Centers for Medicare and Medicaid Services saw America’s national healthcare expenditure grow 4.1% in 2022 to $4.5 trillion. During the decade that ends in 2032, the government agency expects total healthcare spending growth to accelerate to 5.6% annually.

Increasing healthcare expenses seems like an unstoppable trend. With leading positions in vertically integrated healthcare industries, CVS Health can reasonably be expected to provide another decade of significant dividend raises.

Should you invest $1,000 in Pfizer right now?

Before you buy stock in Pfizer, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Pfizer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $808,105!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of June 10, 2024

Cory Renauer has positions in CVS Health. The Motley Fool has positions in and recommends Bristol Myers Squibb and Pfizer. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.

3 High-Yield S&P 500 Dividend Stocks Down More Than 25% to Buy Now and Hold for at Least a Decade was originally published by The Motley Fool