Merck Continues Rewarding Shareholders with Rising Dividend Income Distributions (MRK)
By: Ned Piplovic,
Merck & Co., Inc. (NYSE:MRK) has been boosting its annual dividends and is continuing the delivery of rising dividend income payouts to its shareholders, which are currently complemented by a surging share price that delivered a combined total return in excess of 50% over the past year.
Merck has failed to boost its annual dividend only the first year after emerging in its current iteration following a merger with the Schering-Plough Corporation in 2009. However, looking at the history of rising dividend payouts before the 2009 merger, Merck has hiked its annual dividend payout amount 31 out of 35 years, which is a record of delivering rising dividend payouts nearly 90% of the time. Even if we included six years of flat dividend distributions between 2005 and 2010, Merck has still delivered rising dividend payouts nearly 80% of the time over the past 45 years.
In addition to the rising dividend payouts, Merck’s strong asset appreciation over the last 12 months should instill confidence that the company can deliver robust total returns, at least in the near-term. However, interested investors must complete their own research to ensure the compatibility of Merck’s stock with their own investment portfolio strategy.
A particularly interesting development is Merck’s attempts to acquire a clinical-stage immunotherapy company Immune Design Corporation (NASDAQ:IMDZ). While Merck announced its intention to acquire Immune Design more than two weeks ago, Merck filed documents with the Securities and Exchange Commission on March 5, 2019, which was the day that Merck’s share price reached its 52-week high.
While the $300 million acquisition should not impact Merck significantly, the share price could pull back a little more before fully resuming its current uptrend. Therefore, the current price dip could be an opportunity to buy MRK shares at a slight discount and enjoy rising dividend income payouts while waiting for the share price’s full recovery.
Therefore, investors interested in adding a long MRK position to their portfolio should act before the March 14, 2019, ex-dividend date to lock in the shareholder of record status and eligibility to receive the upcoming dividend distributions. Merck will distribute the next round of dividend payouts on the April 5, 2019, pay date to all shareholders who claim stock ownership before the ex-dividend date.
Merck & Co., Inc. (NYSE:MRK)
Headquartered in Kenilworth, New Jersey and founded in 1891, Merck & Co., Inc. is a global health care company that focuses on the development of pharmaceutical products. Among its full spectrum of drugs and medications, the company provides therapeutic and preventive agents to treat cardiovascular diseases, type 2 diabetes, acute and chronic pulmonary conditions, chronic hepatitis C virus, HIV-1 infection, fungal, intra-abdominal infections, arthritis and pain, inflammatory, osteoporosis and fertility diseases. Additionally, the company offers products to prevent chemotherapy-induced and post-operative side-effects, treat brain tumors and certain types of lung cancer, as well as offers vaccines for measles, mumps, rubella, varicella, shingles, rotavirus gastroenteritis and pneumococcal diseases.
The company’s current $0.55 quarterly dividend payout amount represents a 14.6% hike over the $0.48 quarterly payout amount from the same period last year. This new quarterly amount corresponds to a $2.20 annualized payout and currently yields 2.7%. Despite the rising dividend payouts, the current yield is 11% lower than Merck’s own five-year average yield. The primary reason for the yield decline is the nearly 50% share price increase over the past 12 months.
However, while slightly lower than its own five-year average, Merck’s current yield is more than five-fold above the 0.54% average dividend yield of the entire Health Care sector and 50% higher than the 1.81% simple yield average of Merck’s peers in the Major Drug Manufacturers industry segment.
Since the 2009 merger with the Schering-Plough Corporation, Merck & Co. paid a flat annual dividend and then boosted its annual payout higher every year over the past eight years. Over that period, the total annual payout amount rose 45%, which is equivalent to an average growth rate of 4.7% per year.
Unlike many other equities, which struggled to recover shareholder losses over the past year. Merck delivered to its shareholders a total return of 52.5% over the trailing one-year period. The five-year total return was slightly higher at 57.5% and the highest total return of slightly more than 66% occurred over the past three years.
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