Stock Analysis: Best Dividend Stocks

Fundamental Rating

MRK gets a fundamental rating of 7 out of 10. The analysis compared the fundamentals against 198 industry peers in the Pharmaceuticals industry. MRK scores excellent points on both the profitability and health parts. This is a solid base for a good stock. MRK is valued quite cheap, while showing a decent growth score. This is a good combination! Finally MRK also has an excellent dividend rating. With these ratings, MRK could be worth investigating further for value and dividend and quality investing!.

1. Profitability

1.1 Basic Checks

MRK had positive earnings in the past year.

MRK had a positive operating cash flow in the past year.

In the past 5 years MRK has always been profitable.

MRK had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

With an excellent Return On Assets value of 14.62%, MRK belongs to the best of the industry, outperforming 96.97% of the companies in the same industry.

The Return On Equity of MRK (36.96%) is better than 96.97% of its industry peers.

The Return On Invested Capital of MRK (19.77%) is better than 94.44% of its industry peers.

Measured over the past 3 years, the Average Return On Invested Capital for MRK is significantly below the industry average of 41.77%.

		Industry Rank	Sector Rank
ROA	14.62%
ROE	36.96%
ROIC	19.77%

ROA(3y)9.42%

ROA(5y)9.66%

ROE(3y)23.17%

ROE(5y)26.32%

ROIC(3y)20.13%

ROIC(5y)17.77%

1.3 Margins

With an excellent Profit Margin value of 26.68%, MRK belongs to the best of the industry, outperforming 96.46% of the companies in the same industry.

MRK's Profit Margin has been stable in the last couple of years.

MRK has a Operating Margin of 34.59%. This is amongst the best in the industry. MRK outperforms 95.96% of its industry peers.

MRK's Operating Margin has improved in the last couple of years.

The Gross Margin of MRK (78.19%) is better than 84.34% of its industry peers.

In the last couple of years the Gross Margin of MRK has grown nicely.

		Industry Rank	Sector Rank
OM	34.59%
PM (TTM)	26.68%
GM	78.19%

OM growth 3Y4.43%

OM growth 5Y7.18%

PM growth 3Y-0.15%

PM growth 5Y1.18%

GM growth 3Y3.55%

GM growth 5Y2.42%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so MRK is creating value.

Compared to 1 year ago, MRK has about the same amount of shares outstanding.

MRK has less shares outstanding than it did 5 years ago.

MRK has a better debt/assets ratio than last year.

2.2 Solvency

An Altman-Z score of 3.70 indicates that MRK is not in any danger for bankruptcy at the moment.

The Altman-Z score of MRK (3.70) is better than 79.29% of its industry peers.

MRK has a debt to FCF ratio of 2.05. This is a good value and a sign of high solvency as MRK would need 2.05 years to pay back of all of its debts.

With an excellent Debt to FCF ratio value of 2.05, MRK belongs to the best of the industry, outperforming 93.43% of the companies in the same industry.

A Debt/Equity ratio of 0.74 indicates that MRK is somewhat dependend on debt financing.

Looking at the Debt to Equity ratio, with a value of 0.74, MRK is doing worse than 67.17% of the companies in the same industry.

Even though the debt/equity ratio score it not favorable for MRK, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.

		Industry Rank	Sector Rank
Debt/Equity	0.74
Debt/FCF	2.05
Altman-Z	3.7

ROIC/WACC2.13

WACC9.27%

2.3 Liquidity

MRK has a Current Ratio of 1.36. This is a normal value and indicates that MRK is financially healthy and should not expect problems in meeting its short term obligations.

MRK has a Current ratio of 1.36. This is in the lower half of the industry: MRK underperforms 76.26% of its industry peers.

A Quick Ratio of 1.15 indicates that MRK should not have too much problems paying its short term obligations.

With a Quick ratio value of 1.15, MRK is not doing good in the industry: 72.22% of the companies in the same industry are doing better.

MRK does not score too well on the current and quick ratio evaluation. However, as it has excellent solvency and profitability, these ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

		Industry Rank	Sector Rank
Current Ratio	1.36
Quick Ratio	1.15

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WACC

Debt/Equity

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

MRK shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 409.33%, which is quite impressive.

The Earnings Per Share has been growing by 8.04% on average over the past years. This is quite good.

MRK shows a small growth in Revenue. In the last year, the Revenue has grown by 6.74%.

The Revenue has been growing by 10.40% on average over the past years. This is quite good.

EPS 1Y (TTM)409.33%

EPS 3Y6.87%

EPS 5Y8.04%

EPS Q2Q%5633.33%

Revenue 1Y (TTM)6.74%

Revenue growth 3Y9.63%

Revenue growth 5Y10.4%

Sales Q2Q%6.79%

3.2 Future

The Earnings Per Share is expected to grow by 6.16% on average over the next years.

The Revenue is expected to grow by 2.43% on average over the next years.

EPS Next Y18.6%

EPS Next 2Y14.32%

EPS Next 3Y13.3%

EPS Next 5Y6.16%

Revenue Next Year1.66%

Revenue Next 2Y3.96%

Revenue Next 3Y4.55%

Revenue Next 5Y2.43%

3.3 Evolution

The EPS growth rate is decreasing: in the next years the growth will be less than in the last years.

When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.

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4. Valuation

4.1 Price/Earnings Ratio

MRK is valuated reasonably with a Price/Earnings ratio of 10.21.

Based on the Price/Earnings ratio, MRK is valued cheaply inside the industry as 90.40% of the companies are valued more expensively.

The average S&P500 Price/Earnings ratio is at 28.29. MRK is valued rather cheaply when compared to this.

Based on the Price/Forward Earnings ratio of 8.61, the valuation of MRK can be described as reasonable.

89.90% of the companies in the same industry are more expensive than MRK, based on the Price/Forward Earnings ratio.

MRK's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 21.32.

		Industry Rank	Sector Rank
PE	10.21
Fwd PE	8.61

4.2 Price Multiples

Based on the Enterprise Value to EBITDA ratio, MRK is valued cheaply inside the industry as 86.36% of the companies are valued more expensively.

Based on the Price/Free Cash Flow ratio, MRK is valued cheaper than 89.90% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	10.85
EV/EBITDA	8.21

4.3 Compensation for Growth

MRK's low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.

MRK has an outstanding profitability rating, which may justify a higher PE ratio.

MRK's earnings are expected to grow with 13.30% in the coming years. This may justify a more expensive valuation.

PEG (NY)0.55

PEG (5Y)1.27

EPS Next 2Y14.32%

EPS Next 3Y13.3%

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5. Dividend

5.1 Amount

MRK has a Yearly Dividend Yield of 4.15%, which is a nice return.

The stock price of MRK dropped by -20.34% in the last 3 months. With lower prices the dividend yield is higher, but it may be a sign investors do not trust the long term dividend.

MRK's Dividend Yield is rather good when compared to the industry average which is at 4.72. MRK pays more dividend than 94.44% of the companies in the same industry.

Compared to an average S&P500 Dividend Yield of 2.51, MRK pays a better dividend.

		Industry Rank	Sector Rank
Dividend Yield	4.15%

5.2 History

The dividend of MRK is nicely growing with an annual growth rate of 6.90%!

MRK has been paying a dividend for at least 10 years, so it has a reliable track record.

MRK has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.

Dividend Growth(5Y)6.9%

Div Incr Years13

Div Non Decr Years33

5.3 Sustainability

45.80% of the earnings are spent on dividend by MRK. This is a bit on the high side, but may be sustainable.

The dividend of MRK is growing, but the earnings are growing slower. This means the dividend growth is not sustainable.

DP45.8%

EPS Next 2Y14.32%

EPS Next 3Y13.3%

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New York Stock Exchange, Inc. / Health Care / Pharmaceuticals

1. Profitability

1.1 Basic Checks

1.2 Ratios

1.3 Margins

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2. Health

2.1 Basic Checks

2.2 Solvency

2.3 Liquidity

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3. Growth

3.1 Past

3.2 Future

3.3 Evolution

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4. Valuation

4.1 Price/Earnings Ratio

4.2 Price Multiples

4.3 Compensation for Growth

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5. Dividend

5.1 Amount

5.2 History

5.3 Sustainability

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