Is Bristol Myers Squibb a Good Dividend Stock to Buy Now?

If you're looking for a way to permanently boost your passive income stream, you've probably seen Bristol Myers Squibb (NYSE: BMY) when you screen for stocks that pay big dividends.

At recent prices, the Big Pharma stock offers a 4.7% yield. Unfortunately, dividend payers rarely offer such high yields unless there are reasons to suspect they can't maintain their payout-raising streaks.

Let's look a little closer at why investors are worried about this drugmaker's dividend payout and what the company's doing to boost earnings over the long run.

Why Bristol Myers Squibb offers an ultra-high dividend yield

Pharmaceutical companies are made of many moving parts. This one's stock price is under pressure because Revlimid, a blood cancer drug, lost patent-protected market exclusivity in the U.S. a few years ago. Volume restrictions that end in 2026 have minimized Revlimid losses so far, but U.S. sales of the drug are still responsible for about 11% of total revenue.

Eliquis, an oral blood thinner that Bristol Myers Squibb markets in partnership with Pfizer , is responsible for about 28% of total revenue. In 2028, Eliquis sales will most likely begin tanking in response to generic competition.

To prepare for upcoming patent cliffs, Bristol Myers Squibb has been acquiring smaller drugmakers, including a $14 billion acquisition of Karuna Therapeutics. The asset that inspired the purchase, KarXT, could become a much-needed new treatment option for patients with schizophrenia if approved by the Food and Drug Administration (FDA) later this year.

These days, pharmaceutical companies are recording acquisitions of clinical-stage assets with in-process research and development (IPRD) expenses instead of inflating their balance sheets with intangible assets they might write down later. Bristol Myers Squibb stock tanked in April after management lowered the midpoint of its earnings outlook for 2024 from $7.25 per share to just $0.55 to account for a $12.1 billion IPRD charge related to the Karuna Therapeutics acquisition.

Bristol Myers Squibb has raised its dividend payout every year since 2009. With the stock price under pressure, the shares offer an unusually high 4.8% dividend yield.

Why Bristol Myers Squibb stock looks like a good investment now

The FDA is reviewing KarXT's application at the moment and expects to issue a decision on or before Sept. 26. Approval of the much-needed new treatment option seems highly likely.

During the pivotal trial supporting the KarXT application, it effectively reduced the positive and negative symptoms of schizophrenia. Moreover, it will be much easier to tolerate than competing drugs because it doesn't block dopamine receptors.

Side effects that arise from the blocking of dopamine receptors are a big problem for all of the antipsychotic drugs KarXT could compete against. With an advantageous safety profile, some analysts are predicting peak sales of $10 billion annually.

KarXT isn't the only reason to assume Bristol Myers Squibb can overcome upcoming patent cliffs and continue raising its dividend. The company's growth portfolio contains more than a dozen products and grew second-quarter sales by 21% year over year at constant currency.

Investors can look forward to strong contributions from several recently approved drugs for years to come. For example, the FDA approved Rebloyzl as a first-line anemia treatment for patients with lower-risk myelodysplastic syndromes last summer.

In the second quarter, U.S. Rebloyzl sales bounded 96% higher to an annualized $1.4 billion. A subsequent approval for similar patients in the EU could push annual sales of the drug past $4 billion in a few years.

A buy now

At recent prices, you can scoop up shares of Bristol Myers Squibb for about 8.3 times trailing free cash flow . This multiple is so low that long-term investors could realize market-beating gains over the long run even if earnings barely creep higher.

There are no guarantees, but it sure looks as if this Big Pharma company has enough new products to offset incoming patent cliffs. Adding some shares to a diverse portfolio looks like a smart move now for most investors.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bristol Myers Squibb and Pfizer. The Motley Fool has a disclosure policy .