3 Healthcare Stocks Topping a 2025 List of Dividend Yields

As an old investing adage goes: Investors have lost more reaching for yield than at the point of a gun. That may sound a bit dramatic, but when you think of all the yield trap stocks -- high-yield dividend stocks whose big losses have offset their big quarterly payouts -- you can embrace this Wall Street maxim as a warning not to focus only on dividend yield while disregarding other important factors such as future growth prospects.

This holds true for healthcare stocks offering high dividends as well. Yet while there may be some high-yielding healthcare stocks that are more value trap than generational buying opportunity, don't assume that means a high dividend yield is always a red flag.

At least, that's the case with Bristol Myers Squibb (NYSE: BMY), Pfizer (NYSE: PFE), and Dentsply Sirona (NASDAQ: XRAY). Each has a high yield and a poor near-term track record of price performance, but may prove a worthwhile buy at the current price.

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Low-priced Bristol Myers Squibb has a high yield, and may be exiting a growth slump

On the surface, Bristol Myers Squibb may seem like a value trap -- it's trading for only 7.5 times forward earnings estimates, and with a forward dividend yield of around 5.3%. You might think that there must be a major reason for investors to price shares in the pharmaceutical giant so cheaply. For several years, they've had a reason to lean bearish on this stock.

Many of the company's past blockbuster drugs, such as Eliquis, now face heavy competition from generics. However, Bristol Myers Squibb's "growth portfolio" may be helping to counter these declines. Last quarter, sales increased 3%, and adjusted earnings came in at $1.63 per share, $0.12 above sell-side analysts' estimate. BMS also narrowed its full-year earnings per share (EPS) guidance, from a range of $6.35 to $6.65 per share to between $6.40 and $6.60 per share.

From here, success with in-demand products like Breyanzi and Reblozyl may result in further improvements to revenue and earnings growth. In the meantime, you can earn steady returns from the stock's dividend. Bristol Myers Squibb has steadily raised its dividend each year since 2010.

A 7% forward yield isn't the only reason to like Pfizer

Investors have punished pharma giant Pfizer's lack of growth by giving the stock a super-low valuation -- around 9 times forward earnings. But Pfizer has 16 years of consecutive dividend growth, and as it has continued to raise its payouts while shares stay under pressure, the stock now sports a very high forward dividend yield of 7%.

However, that's not the only reason to like this stock. Another is that Pfizer has possibly found a strong solution to its patent cliff issue. Recently, the company beat out Novo Nordisk in a bidding war for Metsera (NASDAQ: MTSR), a developer of anti-obesity drugs. This pharma giant is paying a pretty penny to buy Metsera, with the total deal price coming in at $10 billion.

Nevertheless, if Pfizer proves successful in further developing and monetizing Metsera's portfolio of drug candidates, it could not only do wonders for earnings growth, but could also lead to valuation expansion. Pharma stocks that have benefited greatly from the boom in weight loss drugs currently trade at substantially higher valuations. For example, Novo Nordisk trades at a forward price-to-earnings (P/E) ratio of 14, while Eli Lilly trades for 27 times forward earnings.

Dentsply Sirona offers a possible "get paid while you wait" situation

Dentsply Sirona is a leading supplier of dental supplies and medical devices. This might sound like the sort of wonderful business that the market would assign a high valuation to, but currently, that's not the case. The stock trades for around 6.5 times forward earnings. Dentsply Sirona also has a forward dividend yield of around 5.7%.

So why is it so cheap? Across all business segments, the company's sales are declining. Dentsply Sirona has also experienced tariff headwinds -- not to mention a C-suite shakeup. CEO Daniel Scavilla took the helm in August, and now-former CFO Matthew Garth abruptly resigned last week after just six months on the job.

Things may seem like they're going from bad to worse. Yet if Scavilla proves successful in implementing his "return-to-growth action plan," the stock's valuation could expand substantially. Meanwhile, while they wait for a turnaround to take shape, investors get paid by the stock's high dividend.

Thomas Niel 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 recommends Novo Nordisk. The Motley Fool has a disclosure policy.