One stock in the pharmaceutical sector has been calling to me lately like a siren song amid market turbulence.

I'm talking about Bristol-Myers Squibb Co. (BMY), which has taken a beating in the March-April selloff but is dangling a forward estimated 5% dividend yield while generating a whopping 14% annual free cash flow — tops among the largest drug names.

I've been watching this one since January, when it first dipped below $52. Like a patient fisherman, I've been waiting for just the right moment to cast my line. That moment appears to be now, as BMY slides toward the $50 mark amid broader market jitters and sector rotation. It’s remarkable how often Wall Street throws the proverbial baby out with the bathwater during these periodic fits of selling.

The beauty of BMY is not just valuation. It’s historically proven itself as a financial bomb shelter — outperforming the S&P 500 in four major recessions since 1990.

During the 2020 pandemic, it returned 36% vs. the S&P’s 26%. In the Great Recession, it gained 13% while the broader market fell 16%.

During the 1990 Persian Gulf War recession, it delivered a jaw-dropping 76%.

And here’s one more kicker: BMY’s current 14% free cash flow yield is nearly 10% higher than equivalent cash investment yields — among the best “relative yields” it’s posted in 35 years.

On top of that, its 5%+ dividend towers over the S&P’s 1.3% and Big Pharma’s 3.65% median.

This is a rare setup where both the cash yield and the ability to sustain it align — a combination that’s very hard to beat in a defensive play.

Of course, no stock is bulletproof. BMY will need to navigate patent cliffs and increased regulatory scrutiny on drug pricing.

Wall Street is also pricing in little to no growth in the near term — and that’s probably fair. But the current setup suggests BMY could still outperform, especially if the S&P enters a decline in 2025.

This defensive mindset is why Warren Buffett and other veterans have been moving to abnormally extreme levels of cash since 2024. They're battening down the hatches while the financial seas are still relatively calm.

And speaking of smart investors, I had lunch last week at Tadich Grill with a hedge fund manager I’ve known for decades. When I mentioned I was looking for defensive plays, he immediately brought up BMY.

“What’s rare these days,” he said, “is a company with both a high dividend and the cash flow to actually back it up.” He then showed me his firm’s spreadsheets — stress-tested across recession scenarios back to Nixon — and BMY held firm.

Having run similar models myself (if not quite as colour-coded), I nodded in agreement.

At the current ~$50 share price, BMY’s free cash flow yield stands near 14%. That’s nearly 10% better than risk-free Treasury rates and more than double the Big Pharma peer group median of 6.15%.

So what could go wrong? A steeper summer selloff. Or an aggressive federal move to mandate drug pricing — a risk that’s always on the table, but rarely moves quickly. Supply chain issues, especially for ingredients sourced from China, are also worth watching.

That said, BMY has manufacturing facilities globally, and 71% of its revenue comes from the US. That gives it some insulation if trade tensions flare.

But here’s the thing: those risks hit all major pharma companies. BMY starts from a stronger base: better cash flow, better history, better defensive positioning.

My view? BMY is worth owning for its super-sized dividend and battle-tested resilience. I suggest you buy the dip.

 

Remember when your mom told you to eat your vegetables? "They're boring but good for you," she'd insist while you eyed that chocolate cake across the room.

Well, in today's market, Johnson & Johnson (JNJ) is that plate of nutritious broccoli – not the sexiest option on the table, but exactly what your financial diet needs.

And if Q1 earnings are any indication, this particular vegetable is secretly packed with more flavor than the market gave it credit for.

Their recent earnings report confirms what I've been telling anyone who would listen: this pharmaceutical tortoise is quietly outpacing flashier hares.

Sales increased 2.4% year-over-year to $21.9 billion, exceeding analyst expectations and demonstrating that steady growth doesn't need to make headlines to fill portfolios.

While the headline diluted EPS was an eye-popping $4.54 (up over 235%), those savvy enough will look at the adjusted figure of $2.77 (excluding one-time charges) for a more realistic picture of operational performance.

Diving deeper into the numbers reveals a company firing on multiple cylinders.

The MedTech division grew 4.1% to $8 billion, with cardiovascular products leading the charge at 17.7% growth.

Meanwhile, Pharmaceuticals grew 4.2% to $13.87 billion, with oncology growing an impressive 20% to $5.68 billion.

Multiple myeloma therapy Darzalex continues its blockbuster trajectory at $3.24 billion, while the approval of Rybrevant in non-small-cell lung cancer adds yet another potential multi-billion dollar earner to the medicine cabinet.

Now, let's talk about pharmaceutical patent cliffs.

Stelara, JNJ's immunology golden goose, is mid-plummet, with Q1 revenues down 33% to $1.63 billion. As expected, though, JNJ has been quietly lining up replacements.

Their immunology bullpen includes nipocalimab (sporting FDA Fast Track status) and icotrokinra (which cleared skin in 84% of adolescent psoriasis patients).

You can actually practically smell the confidence wafting from management's quarterly statements.

They've bumped their full-year revenue guidance to $91.6-$92.4 billion and hiked the quarterly dividend by 4.8% to $1.30 per share. That makes 63 consecutive years of dividend increases.

I'd be remiss not to mention the twin storm clouds hovering over our healthcare heavyweight.

First, there's the $6.97 billion charge for talc lawsuits after a bankruptcy judge essentially told JNJ their "Texas two-step" legal maneuver was more of a stumble.

Second, the Trump administration's threatened 25% pharmaceutical tariffs. With roughly 44% of Q1 revenues coming from overseas ($9.6 billion compared to $12.3 billion domestic), JNJ isn't completely sheltered from cross-border economic squabbles.

But here's where JNJ's strategic thinking earns my respect: they're doubling down on America with a $55 billion U.S. expansion planned over the next four years.

Back when I was launching hedge funds in the late '80s, I quickly learned to separate companies that merely react to policy changes from those that anticipate and adapt. JNJ falls firmly in the latter category.

For the number-crunchers among you (my people!), JNJ trades at 25.6 times earnings with a price-to-free-cash-flow ratio of 19.95. I ran this through my DCF model using a 10% discount rate.

The math suggests JNJ needs approximately 5% annual free cash flow growth to justify today's price.

With MedTech projected to grow 5-7% annually and Pharmaceuticals showing similar potential, plus those steady share buybacks reducing the float at 1.14% yearly, my spreadsheets spit out an intrinsic value of about $168.39 per share – roughly 7% above where we stand today.

Not a screaming bargain, but a fair price for a company that's mastered the art of sustainable growth.

JNJ won't make you the star of your next cocktail party investment brag-fest. But when markets start convulsing like they've touched a live wire, these steady healthcare veterans tend to keep their vital signs stable.

While your trendier holdings might need intensive care during volatility, JNJ has spent over a century perfecting the art of financial first aid.

In a market that often leaves investors reaching for tissues, JNJ's steady performance lives up to its most famous promise: no more tears.