Dividend investing has long been a popular strategy for generating passive income and building long-term wealth. In the current market conditions, two pharmaceutical stocks - Pfizer and Bristol Myers Squibb - seem poised to shine in 2025 and beyond with their attractive dividend yields.

Pfizer, a leading pharmaceutical company, offers an intriguing income opportunity with its substantial dividend yield of 5.58%. The stock also appears undervalued with a modest forward price-to-earnings (P/E) ratio of 12.8. Wall Street analysts project that Pfizer's shares are trading at a significant bargain, with a mere 10.2 times 2026 projected earnings, compared to the typically high-priced pharmaceutical industry. Moreover, Pfizer's trailing-12-month payout ratio of 68.2% indicates that its dividend is sustainable, making it an attractive option for income-focused investors seeking both yield and growth potential.

Furthermore, Pfizer's diversified pipeline of innovative drugs and vaccines positions the company well for future success. Over the past five years, Pfizer has consistently increased its dividend by an average of 3.1%, which is impressive for a company with a yield of over 5%. Overall, Pfizer's solid financial footing, attractive valuation metrics, and promising product pipeline make it a potentially rewarding option for investors in the pharmaceutical industry.

Bristol Myers Squibb, another tier 1 pharmaceutical company, also offers a healthy dividend yield of 5.3%. Similar to Pfizer, Bristol Myers Squibb's shares trade at an appealing valuation of just 7.24 times 2026 projected earnings. This low valuation is due to concerns about the upcoming patent cliff, with 63% of the company's current revenue at risk from patent expirations this decade, according to analysts at Morgan Stanley. Nevertheless, Bristol Myers Squibb's modest payout ratio of 59.8% suggests that its dividend is sustainable, making it an attractive long-term investment prospect.

Despite the challenges posed by the patent cliff, Bristol Myers Squibb maintains a solid track record of product innovation and value creation for shareholders. The company's robust pipeline and recent acquisitions are expected to drive notable levels of growth and dividend increases over the long haul. Investing in Bristol Myers Squibb shares during this period of market sentiment could prove to be a wise decision.

Research shows that dividend yields are strong predictors of stock returns over longer time horizons. Considering the anticipated rate cuts by the central bank, now could be an opportune time to invest in high-yield equities. Pfizer and Bristol Myers Squibb, with their yields above 5%, undervalued stocks, and presence in an industry expected to benefit from an aging global population, stand out as top contenders for investors looking to tap into a potential rally in high-yield dividend stocks.

Please note that George Budwell holds positions in Pfizer, and The Motley Fool also has positions in and recommends Bristol Myers Squibb and Pfizer. Stay tuned for more updates on these stocks and the broader market trends.