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Why Merck (MRK) is a Great Dividend Stock Right Now
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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. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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
Based in Kenilworth, Merck (MRK - Free Report) is in the Medical sector, and so far this year, shares have seen a price change of -7.22%. The pharmaceutical company is paying out a dividend of $0.65 per share at the moment, with a dividend yield of 3.43% compared to the Large Cap Pharmaceuticals industry's yield of 2.4% and the S&P 500's yield of 1.29%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.60 is up 4.8% 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 8.50%. 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. Merck's current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MRK for this fiscal year. The Zacks Consensus Estimate for 2021 is $6.47 per share, which represents a year-over-year growth rate of 8.92%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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 Great Dividend Stock Right Now
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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
Based in Kenilworth, Merck (MRK - Free Report) is in the Medical sector, and so far this year, shares have seen a price change of -7.22%. The pharmaceutical company is paying out a dividend of $0.65 per share at the moment, with a dividend yield of 3.43% compared to the Large Cap Pharmaceuticals industry's yield of 2.4% and the S&P 500's yield of 1.29%.
Taking a look at the company's dividend growth, its current annualized dividend of $2.60 is up 4.8% 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 8.50%. 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. Merck's current payout ratio is 45%. This means it paid out 45% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for MRK for this fiscal year. The Zacks Consensus Estimate for 2021 is $6.47 per share, which represents a year-over-year growth rate of 8.92%.
Bottom Line
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).