Better High-Yield Dividend Stock to Buy: Bristol Myers Squibb or Pfizer?

When it comes to pharmaceutical stocks and yield, Bristol Myers Squibb (NYSE: BMY) and Pfizer (NYSE: PFE) stand out. However, when deciding which of the two is the better high-yield dividend stock, you need to consider numerous criteria, not just the raw yield itself.

When it comes to today's yield, Pfizer is the clear victor. However, when considering whether the higher yield is sustainable, factors such as dividend payout ratios and earnings forecasts start to cast doubt.

With this in mind, let's examine the dividend health of both companies to get a better idea of which of the two is the better choice for income-focused long-term investors.

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Dividend wars: Bristol Myers Squibb vs. Pfizer

At current prices, Bristol Myers Squibb has a forward dividend yield of around 4.6%. This clearly trails Pfizer's forward yield, which currently comes in at 6.7%. However, the fact that Pfizer's forward yield is so high, especially for a healthcare stock, should signal to you that the market has its own concerns about dividend durability.

This should be apparent to you as well, once you dive into dividend-related metrics such as each stock's payout ratio. Bristol Myers Squibb has a payout ratio of around 40%, whereas Pfizer's payout ratio is over 60%. In other words, while the former's payout ratio is within the healthy range, Pfizer's payout ratio puts it on the cusp of being too high to be sustainable over the long term.

At this level, Pfizer generates enough earnings to sustain the dividend, but with so much cash flowing out as dividends, this leaves less capital to pay down debt, fund organic growth, or make new acquisitions. Besides the payout ratio metric, Bristol Myers Squibb also beats Pfizer on dividend growth. Both companies have a similar number of years of consecutive dividend growth.

Bristol Myers Squibb has increased its dividend 18 years in a row, while Pfizer has grown its dividend 16 years in a row. However, over the past decade, average annual dividend growth for the former has outpaced the latter, with Bristol Myers' dividend increasing by an average of 5.3%, versus 4.4% for Pfizer. Hence, even if Pfizer manages to avoid a dividend cut, in time, the yield gap between these two blue chip dividend stocks will continue to narrow.

Which one comes out on top?

Bristol Myers Squibb may beat Pfizer in terms of dividend durability and growth potential, but as the saying goes, past performance is not indicative of future results. Both companies have similar short-term growth forecasts. Analyst forecasts call for Pfizer's sales to fall 1.4% this year, and by 3.8% in 2027, with earnings rising 8.7% this year, but essentially flatlining next year.

As for Bristol Myers Squibb, analyst forecasts call for 2026 and 2027 sales to decline 1.8% and 2.3%, respectively, with earnings rising by 3% this year but declining 2.2% next year. That said, as seen from the anticipated 2026 results, both Pfizer and Bristol Myers may be on track to continue delivering numbers that exceed expectations. Both companies have expanded their pipelines, as well as pursued cost-cutting measures.

Investors continue to take a "wait and see" approach. Since January, Bristol Myers and Pfizer shares have generated total returns of 3.2% and 6.1%, respectively. Both stocks also continue to trade at low valuations, with both stocks trading for just under 9 times forward earnings.

So, which of these healthcare dividend stocks is the better buy?? Both companies are facing similar challenges and uncertainty, but Bristol Myers Squibb scores well on dividend growth and durability; consider it the stronger choice.

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 has a disclosure policy.