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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 when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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
Based in Kenilworth, Merck (MRK - Free Report) is in the Medical sector, and so far this year, shares have seen a price change of 13.18%. Currently paying a dividend of $0.55 per share, the company has a dividend yield of 2.54%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.84%, while the S&P 500's yield is 1.99%.
Looking at dividend growth, the company's current annualized dividend of $2.20 is up 10.6% from last year. In the past five-year period, Merck has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.01%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Merck's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MRK for this fiscal year. The Zacks Consensus Estimate for 2019 is $4.89 per share, which represents a year-over-year growth rate of 12.67%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MRK presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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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 when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the 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
Based in Kenilworth, Merck (MRK - Free Report) is in the Medical sector, and so far this year, shares have seen a price change of 13.18%. Currently paying a dividend of $0.55 per share, the company has a dividend yield of 2.54%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.84%, while the S&P 500's yield is 1.99%.
Looking at dividend growth, the company's current annualized dividend of $2.20 is up 10.6% from last year. In the past five-year period, Merck has increased its dividend 5 times on a year-over-year basis for an average annual increase of 4.01%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Right now, Merck's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MRK for this fiscal year. The Zacks Consensus Estimate for 2019 is $4.89 per share, which represents a year-over-year growth rate of 12.67%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MRK presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).