This High-Yield Pharma Stock Looks Like an Incredible Bargain

Globe and Mail

30-04-2025

When markets get choppy, smart investors often seek refuge in pharmaceutical stocks. These companies typically offer consistent cash flows, essential products, and solid dividends regardless of economic conditions.
One big pharma name stands out as an exceptional opportunity: Bristol Myers Squibb (NYSE: BMY). The stock has been pummeled in 2025, plunging 23% year to date (at the time of this writing) amid broader market turbulence. This dramatic underperformance has created a rare buying opportunity for investors willing to look past short-term headwinds.
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Bristol Myers Squibb offers a compelling combination of deep value and substantial income that deserves serious consideration. Let's examine why this beaten-down pharmaceutical giant might be one of the market's most attractive bargains.
Value metrics that defy logic
Bristol Myers Squibb currently trades at an almost unbelievable 7.2 times forward earnings. For perspective, the S&P 500 trades at approximately 18 times forward earnings, meaning Bristol Myers Squibb stock sells at a nearly 60% discount to this benchmark index. This extraordinarily low valuation suggests investors are pricing in an overly pessimistic view of the company's future earnings.
For income seekers, the story gets even better. Bristol Myers Squibb currently offers a hefty 5.12% dividend yield, nearly quadruple the S&P 500's current yield of 1.35%. The drugmaker's hefty yield is also the second highest among all major drug manufacturers, with only Pfizer sporting a higher yield. While the company's rather high 91% payout ratio raises questions about sustainability, the pharma titan has successfully navigated similar pressures in the past.
Why the market is so pessimistic
To be fair, Bristol Myers Squibb faces legitimate challenges. Wall Street thinks the company's 2026 revenue will decline by nearly 7%, driven by mounting pricing pressures, geopolitical upheaval, and slowing growth in key franchises. Longer term, the company also faces significant patent expirations for blockbuster drugs Eliquis (cardiovascular) and Opdivo (oncology) beginning in 2028, which could further pressure its revenue base over the balance of the decade.
Recent clinical setbacks haven't helped investor confidence either. The company was recently stung by a string of clinical trial failures across several key pipeline assets, including cancer drug Opdualag, neuroscience drug Cobenfy, and heart medication Camzyos. While management insists these failures don't affect the drugs' core growth opportunities, the market remains skeptical.
The case for optimism
A deeper examination of Bristol Myers' underlying business reveals several factors the market appears to be overlooking in its rush to abandon the stock.
First, Bristol Myers Squibb's aggressive acquisition strategy has built a diversified pipeline that extends well beyond its existing blockbusters. Recent acquisitions of oncology companies Mirati and RayzeBio, along with neurology specialist Karuna, have strengthened its position in high-growth therapeutic areas, creating multiple potential growth drivers.
Second, the company is making significant progress paying down debt from prior deals, improving financial flexibility for future value-creating acquisitions. This strengthened balance sheet positions Bristol Myers Squibb to capitalize on the current biotech downturn by acquiring promising assets at attractive valuations.
Most importantly, promising pipeline candidates in cardiology (milvexian) and hematology (iberdomide and mezigdomide) could offset some of the expected revenue decline from patent expirations. Additionally, Cobenfy's upcoming Alzheimer's disease psychosis data could potentially unlock a massive new market.
A contrarian opportunity worth the risks
Bristol Myers Squibb stock offers that rare combination of deep value and substantial income that typically signals a compelling contrarian opportunity. While the company undeniably faces serious challenges, the market's extreme pessimism appears to have overshot reality.
For patient investors willing to accept some near-term uncertainty, the current entry point offers an exceptional risk-reward proposition. Even if revenue declines materialize as projected, the stock's rock-bottom valuation provides a substantial margin of safety -- all while investors collect a hefty 5.12% dividend.
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