Pfizer offers higher yield than Bristol Myers Squibb despite patent cliffs

Pfizer and Bristol Myers Squibb present distinct trade-offs for income investors, with Pfizer offering a forward dividend yield of 5.8% compared to Bristol Myers Squibb's yield of approximately 4.3%. While both companies are large pharmaceutical manufacturers facing upcoming patent expirations, their dividend safety and growth trajectories differ significantly.

Bristol Myers Squibb has maintained a dividend payment record for 94 consecutive years and has increased its payout for 17 straight years. The company's dividend payments currently represent around 55% of earnings, a payout ratio that provides a cushion compared to Pfizer. In recent quarters, Pfizer's payout ratio has exceeded 100% based on GAAP earnings, although the company continues to generate sufficient free cash flow to fund its dividends. Pfizer management has stated that the dividend will not be cut, and CEO Albert Bourla has publicly defended the company's ability to maintain the dividend at current levels.

Both firms face significant patent cliffs that could impact future revenue. The two companies co-market the blood thinner Eliquis, which faces U.S. generic competition in 2028. Pfizer also expects to lose patent exclusivity for its drugs Ibrance and Xtandi in the coming years, while Bristol Myers Squibb will lose exclusivity for its cancer immunotherapy Opdivo within the next two years.

Despite these challenges, Bristol Myers Squibb has crossed an inflection point where its growth portfolio now drives revenue, offsetting declines from its legacy portfolio. Pfizer projects high single-digit revenue growth after 2028 and cites a pipeline that includes the weight-loss drug berobenatide. The author notes that while Bristol Myers Squibb's dividend appears safer and the stock may outperform Pfizer over the next few years due to lower executional risk, Pfizer is the better choice for maximizing income. The higher yield at Pfizer is expected to remain superior to Bristol Myers Squibb's, and newer products are anticipated to generate enough free cash flow to sustain the dividend. The author suggests that owning both stocks may be the optimal approach for income investors seeking long-term returns.