Stock Analysis: Best Dividend Stocks

Fundamental Rating

Overall MRK gets a fundamental rating of 7 out of 10. We evaluated MRK 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 scores decently on growth, while it is valued quite cheap. This could make an interesting combination. Finally MRK also has an excellent dividend rating. These ratings could make MRK a good candidate for value and dividend and quality investing.

1. Profitability

1.1 Basic Checks

MRK had positive earnings in the past year.

In the past year MRK had a positive cash flow from operations.

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

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

1.2 Ratios

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

MRK's Return On Equity of 36.96% is amongst the best of the industry. MRK outperforms 96.97% of its industry peers.

MRK has a Return On Invested Capital of 19.77%. This is amongst the best in the industry. MRK outperforms 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

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.

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

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

MRK has a Gross Margin of 78.19%. This is amongst the best in the industry. MRK outperforms 84.34% of its industry peers.

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

		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

MRK has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.

MRK has about the same amout of shares outstanding than it did 1 year ago.

Compared to 5 years ago, MRK has less shares outstanding

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

2.2 Solvency

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

With a decent Altman-Z score value of 3.70, MRK is doing good in the industry, outperforming 79.29% of the companies in the same industry.

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.

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.

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/WACC2.16

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

MRK has a Quick Ratio of 1.15. This is a normal value and indicates that MRK is financially healthy and should not expect problems in meeting its short term obligations.

Looking at the Quick ratio, with a value of 1.15, MRK is doing worse than 72.22% of the companies in the same industry.

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%.

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

MRK is expected to show a small growth in Earnings Per Share. In the coming years, the EPS will grow by 6.16% yearly.

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

Based on the Price/Earnings ratio of 10.21, the valuation of MRK can be described as reasonable.

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

Compared to an average S&P500 Price/Earnings ratio of 28.29, MRK is valued rather cheaply.

MRK is valuated reasonably with a Price/Forward Earnings ratio of 8.61.

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

When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (21.32), we can say MRK is valued rather cheaply.

		Industry Rank	Sector Rank
PE	10.21
Fwd PE	8.61

4.2 Price Multiples

MRK's Enterprise Value to EBITDA ratio is rather cheap when compared to the industry. MRK is cheaper than 86.36% of the companies in the same industry.

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

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

The excellent profitability rating of MRK 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 paid a dividend for at least 10 years, which is 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.

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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