Portfolio Update
The FiveTwenty portfolio received no dividends in the past week.
| Past Week Dividend | $0 |
| Current Quarter Dividend (Q4 2021) | $246 |
| LifeTime Dividend | $1,347.33 |
| Estimated Annual Dividend | $3,083.13 |
The capital allocation for the week of 10/17/2021 to 10/23/2021 will be used to add to our position in Bristol-Myers Squibb (NYSE: BMY).
BMY – Position Update
Since our last check-in on BMY in week 35 of 2021, the company declared a quarterly dividend of $0.49 per share payable on 11/01/2021 with an ex-div date of 09/30/2021. Furthermore, BMY is scheduled to release Q3 2021 earnings on 10/27/2021. And finally, the share price has seen a significant sell during that time dropping 12.4% from $66.60 to $58.36.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 14 years | 14 years | |
| Yield | 3.36% | 2.88% | 2.91% |
| Payout Ratio | 28.4%1 | 28.4%1 | NA |
| P/E | 8.631 | 9.851 | NA |
1 computed using TTM adjusted EPS of $6.76 as of Q1 2021
Q2 2021 earnings report
Did BMY’s latest earnings report raise any warning flags?
We discussed the earnings report in more detail on our previous update. Overall, revenue grew 16%, adjusted net income increased 15.6%, and adjusted EPS were 18% higher compared to Q2 2020. We expect BMY to report solid growth for Q3 2021 as well.
| Revenue (in millions) | Net Income (in millions) | EPS . | |
| Q2 2020 | $10,129 | $3,750 | $1.63 |
| Q2 2021 | $11,703 | $4,336 | $1.93 |
| % Change | 16% | 15.6% | 18% |
The sharp decline in the share price is being drive by fear of drug legislation meant to lower prescription drug prices currently being discussed in Washington. This certainly has the potential to materially impact on the company in the long term. However, until the legislation is actually passed all future impact is highly speculative.
Thesis
Why are we adding BMY to the FiveTwenty portfolio?
Our investment thesis remains unchanged from previous articles. We view BMY as a reliable source of growing dividends for years to come. The company is making investments into its product pipeline (e.g. Celgene acquisition, new product launches) to power future growth. Additionally, the low payout ration (on adjusted EPS) should make the dividend easily sustainable.
Finally, we view the recent drop in the share price as an good opportunity to add to our position at a very attractive valuation and great initial yield.
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