An in-depth look at Merck & Co Inc's dividend history, yield, growth rates, and future prospects
Merck & Co Inc(MRK, Financial) recently announced a dividend of $0.73 per share, payable on 2023-10-06, with the ex-dividend date set for 2023-09-14. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Merck & Co Incs dividend performance and assess its sustainability.
What Does Merck & Co Inc Do?
Merck makes pharmaceutical products to treat several conditions in a number of therapeutic areas, including cardiometabolic disease, cancer, and infections. Within cancer, the firm's immuno-oncology platform is growing as a major contributor to overall sales. The company also has a substantial vaccine business, with treatments to prevent pediatric diseases as well as human papillomavirus, or HPV. Additionally, Merck sells animal health-related drugs. From a geographical perspective, just under half of the company's sales are generated in the United States.
A Glimpse at Merck & Co Inc's Dividend History
Merck & Co Inc has maintained a consistent dividend payment record since 1985. Dividends are currently distributed on a quarterly basis. Merck & Co Inc has increased its dividend each year since 1985. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 38 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Merck & Co Inc's Dividend Yield and Growth
As of today, Merck & Co Inc currently has a 12-month trailing dividend yield of 2.64% and a 12-month forward dividend yield of 2.69%. This suggests an expectation of increase dividend payments over the next 12 months.
Over the past three years, Merck & Co Inc's annual dividend growth rate was 7.40%. Extended to a five-year horizon, this rate increased to 8.70% per year. And over the past decade, Merck & Co Inc's annual dividends per share growth rate stands at 5.40%.
Based on Merck & Co Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Merck & Co Inc stock as of today is approximately 4.01%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Merck & Co Inc's dividend payout ratio is 2.36. And this may suggest that the company's dividend may not be sustainable.
Merck & Co Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Merck & Co Inc's profitability 8 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Merck & Co Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Merck & Co Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Merck & Co Inc's revenue has increased by approximately 15.40% per year on average, a rate that outperforms than approximately 77.38% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Merck & Co Inc's earnings increased by approximately 37.20% per year on average, a rate that outperforms than approximately 79.83% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 38.50%, which outperforms than approximately 89.98% of global competitors.
Next Steps
Given Merck & Co Inc's consistent dividend payments, impressive growth rate, and strong profitability, it remains an attractive stock for dividend investors. However, the sustainability of its dividend payments hinges on the company's ability to maintain its profitability and growth metrics. As such, investors should continue to monitor these factors closely. Remember, investing is not just about picking stocks but picking the right stocks at the right time.
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