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 has outstanding health and profitabily ratings, belonging to the best of the industry. This is a solid base for any company. MRK is valued quite cheap, while showing a decent growth score. This is a good combination! Finally MRK also has an excellent dividend rating. This makes MRK very considerable 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.

MRK had positive earnings in each of the past 5 years.

In the past 5 years MRK always reported a positive cash flow from operatings.

1.2 Ratios

MRK has a better Return On Assets (14.62%) than 96.97% of its industry peers.

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

With an excellent Return On Invested Capital value of 19.77%, MRK belongs to the best of the industry, outperforming 94.44% of the companies in the same industry.

The Average Return On Invested Capital over the past 3 years 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

MRK has a Profit Margin of 26.68%. This is amongst the best in the industry. MRK outperforms 96.46% of its industry peers.

In the last couple of years the Profit Margin of MRK has remained more or less at the same level.

With an excellent Operating Margin value of 34.59%, MRK belongs to the best of the industry, outperforming 95.96% of the companies in the same industry.

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

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.

The number of shares outstanding for MRK remains at a similar level compared to 1 year ago.

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

Compared to 1 year ago, MRK has an improved debt to assets ratio.

2.2 Solvency

MRK has an Altman-Z score of 3.70. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.

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

The Debt to FCF ratio of MRK is 2.05, which is a good value as it means it would take MRK, 2.05 years of fcf income to pay off all of its debts.

MRK's Debt to FCF ratio of 2.05 is amongst the best of the industry. MRK outperforms 93.43% of its industry peers.

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

With a Debt to Equity ratio value of 0.74, MRK is not doing good in the industry: 67.17% of the companies in the same industry are doing better.

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/WACC2.16

WACC9.17%

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 worse Current ratio (1.36) than 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.

MRK's Quick ratio of 1.15 is on the low side compared to the rest of the industry. MRK is outperformed by 72.22% of its industry peers.

The current and quick ratio evaluation for MRK is rather negative, while it does have 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

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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.

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

MRK shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 10.40% yearly.

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

Based on estimates for the next years, MRK will show a small growth in Earnings Per Share. The EPS will grow by 6.16% on average per year.

MRK is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 2.43% yearly.

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.

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

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4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 10.16, which indicates a very decent valuation of MRK.

Based on the Price/Earnings ratio, MRK is valued cheaper than 90.40% of the companies in the same industry.

When comparing the Price/Earnings ratio of MRK to the average of the S&P500 Index (28.29), we can say MRK is valued rather cheaply.

Based on the Price/Forward Earnings ratio of 8.57, the valuation of MRK can be described as reasonable.

MRK's Price/Forward Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 89.90% of the companies in the same industry.

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	10.16
Fwd PE	8.57

4.2 Price Multiples

Based on the Enterprise Value to EBITDA ratio, MRK is valued cheaper than 86.36% of the companies in the same industry.

Compared to the rest of the industry, the Price/Free Cash Flow ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 89.90% of the companies listed in the same industry.

		Industry Rank	Sector Rank
P/FCF	10.8
EV/EBITDA	8.21

4.3 Compensation for Growth

The 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)1.26

EPS Next 2Y14.32%

EPS Next 3Y13.3%

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5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 4.15%, MRK is a good candidate for dividend investing.

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.

Compared to an average industry Dividend Yield of 4.72, MRK pays a better dividend. On top of this MRK pays more dividend than 94.44% of the companies listed in the same industry.

MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.51.

		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 their dividend for at least 10 years, which is a reliable track record.

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.

MRK's earnings are growing slower than its dividend. 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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