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Why Merck (MRK) is a Top Dividend Stock for Your Portfolio
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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Merck in Focus
Headquartered in Kenilworth, Merck (MRK - Free Report) is a Medical stock that has seen a price change of 3.7% so far this year. The pharmaceutical company is currently shelling out a dividend of $0.55 per share, with a dividend yield of 2.78%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.77% and the S&P 500's yield of 1.93%.
Looking at dividend growth, the company's current annualized dividend of $2.20 is up 10.6% from last year. Over the last 5 years, Merck has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.88%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Merck's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
MRK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.63 per share, with earnings expected to increase 6.68% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MRK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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Why Merck (MRK) is a Top Dividend Stock for Your Portfolio
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Merck in Focus
Headquartered in Kenilworth, Merck (MRK - Free Report) is a Medical stock that has seen a price change of 3.7% so far this year. The pharmaceutical company is currently shelling out a dividend of $0.55 per share, with a dividend yield of 2.78%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.77% and the S&P 500's yield of 1.93%.
Looking at dividend growth, the company's current annualized dividend of $2.20 is up 10.6% from last year. Over the last 5 years, Merck has increased its dividend 5 times on a year-over-year basis for an average annual increase of 2.88%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Merck's current payout ratio is 51%, meaning it paid out 51% of its trailing 12-month EPS as dividend.
MRK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2019 is $4.63 per share, with earnings expected to increase 6.68% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MRK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).