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 gets an excellent profitability rating and is at the same time showing great financial health properties. MRK may be a bit undervalued, certainly considering the very reasonable score on growth 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.

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

Each year in the past 5 years MRK has been profitable.

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.

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

MRK's Return On Invested Capital of 19.77% is amongst the best of 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 better Profit Margin (26.68%) than 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's Operating Margin of 34.59% is amongst the best of 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 better Gross Margin (78.19%) 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.

Compared to 5 years ago, MRK has less shares outstanding

The debt/assets ratio for MRK has been reduced compared to a year ago.

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.

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.

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.

MRK has a Debt/Equity ratio of 0.74. This is a neutral value indicating MRK is somewhat dependend on debt financing.

MRK has a worse Debt to Equity ratio (0.74) than 67.17% of its industry peers.

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

A Current Ratio of 1.36 indicates that MRK should not have too much problems paying its short term obligations.

MRK has a worse Current ratio (1.36) than 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.

The Quick ratio of MRK (1.15) is worse than 72.22% of its industry peers.

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

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Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 409.33% over the past year.

MRK shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 8.04% yearly.

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

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.

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

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

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 10.19, which indicates a very decent valuation of MRK.

MRK's Price/Earnings ratio is rather cheap when compared to the industry. MRK is cheaper than 90.40% of the companies in the same industry.

MRK is valuated cheaply when we compare the Price/Earnings ratio to 27.63, which is the current average of the S&P500 Index.

MRK is valuated reasonably with a Price/Forward Earnings ratio of 8.59.

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.

The average S&P500 Price/Forward Earnings ratio is at 20.85. MRK is valued rather cheaply when compared to this.

		Industry Rank	Sector Rank
PE	10.19
Fwd PE	8.59

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.

Based on the Price/Free Cash Flow ratio, MRK is valued cheaply inside the industry as 89.90% of the companies are valued more expensively.

		Industry Rank	Sector Rank
P/FCF	10.83
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.

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

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

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

On average, the dividend of MRK grows each year by 6.90%, which is quite nice.

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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