Stock Analysis: Best Dividend Stocks

Fundamental Rating

Taking everything into account, MRK scores 7 out of 10 in our fundamental rating. MRK was compared to 198 industry peers in the Pharmaceuticals industry. MRK gets an excellent profitability rating and is at the same time showing great financial health properties. A decent growth rate in combination with a cheap valuation! Better keep an eye on MRK. Finally MRK also has an excellent dividend rating. These ratings would make MRK suitable for value and dividend and quality investing!

1. Profitability

1.1 Basic Checks

In the past year MRK was profitable.

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

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

Each year in the past 5 years MRK had a positive operating cash flow.

1.2 Ratios

With an excellent Return On Assets value of 15.14%, MRK belongs to the best of the industry, outperforming 96.46% of the companies in the same industry.

MRK's Return On Equity of 36.07% is amongst the best of the industry. MRK outperforms 96.46% of its industry peers.

MRK's Return On Invested Capital of 19.00% is amongst the best of the industry. MRK outperforms 93.94% of its industry peers.

MRK had an Average Return On Invested Capital over the past 3 years of 20.13%. This is significantly below the industry average of 41.51%.

		Industry Rank	Sector Rank
ROA	15.14%
ROE	36.07%
ROIC	19%

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

Looking at the Profit Margin, with a value of 27.27%, MRK belongs to the top 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.

Looking at the Operating Margin, with a value of 33.84%, MRK belongs to the top of the industry, outperforming 94.95% of the companies in the same industry.

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

MRK's Gross Margin of 78.17% is amongst the best of the industry. MRK outperforms 84.85% of its industry peers.

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

		Industry Rank	Sector Rank
OM	33.84%
PM (TTM)	27.27%
GM	78.17%

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 3.91. This indicates that MRK is financially healthy and has little risk of bankruptcy at the moment.

MRK has a better Altman-Z score (3.91) than 79.29% of its industry peers.

MRK has a debt to FCF ratio of 2.04. This is a good value and a sign of high solvency as MRK would need 2.04 years to pay back of all of its debts.

MRK has a better Debt to FCF ratio (2.04) than 93.94% of its industry peers.

A Debt/Equity ratio of 0.69 indicates that MRK is somewhat dependend on debt financing.

The Debt to Equity ratio of MRK (0.69) is worse than 66.16% 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	0.69
Debt/FCF	2.04
Altman-Z	3.91

ROIC/WACC2.01

WACC9.45%

2.3 Liquidity

MRK has a Current Ratio of 1.41. This is a normal value and indicates that MRK is financially healthy and should not expect problems in meeting its short term obligations.

With a Current ratio value of 1.41, MRK is not doing good in the industry: 73.74% of the companies in the same industry are doing better.

A Quick Ratio of 1.16 indicates that MRK should not have too much problems paying its short term obligations.

With a Quick ratio value of 1.16, MRK is not doing good in the industry: 73.23% 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	1.41
Quick Ratio	1.16

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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 258.99% 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 4.10%.

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)258.99%

EPS 3Y6.87%

EPS 5Y8.04%

EPS Q2Q%7.25%

Revenue 1Y (TTM)4.1%

Revenue growth 3Y9.63%

Revenue growth 5Y10.4%

Sales Q2Q%-1.56%

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.

Based on estimates for the next years, MRK will show a small growth in Revenue. The Revenue will grow by 2.43% on average per year.

EPS Next Y18.6%

EPS Next 2Y14.32%

EPS Next 3Y13.3%

EPS Next 5Y6.16%

Revenue Next Year1.76%

Revenue Next 2Y3.73%

Revenue Next 3Y4.39%

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 9.84.

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 24.95, MRK is valued rather cheaply.

MRK is valuated cheaply with a Price/Forward Earnings ratio of 7.67.

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

When comparing the Price/Forward Earnings ratio of MRK to the average of the S&P500 Index (20.99), we can say MRK is valued rather cheaply.

		Industry Rank	Sector Rank
PE	9.84
Fwd PE	7.67

4.2 Price Multiples

85.86% of the companies in the same industry are more expensive than MRK, based on the Enterprise Value to EBITDA ratio.

Based on the Price/Free Cash Flow ratio, MRK is valued cheaper than 88.89% of the companies in the same industry.

		Industry Rank	Sector Rank
P/FCF	11.32
EV/EBITDA	8.67

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.

A more expensive valuation may be justified as MRK's earnings are expected to grow with 13.30% in the coming years.

PEG (NY)0.53

PEG (5Y)1.22

EPS Next 2Y14.32%

EPS Next 3Y13.3%

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5. Dividend

5.1 Amount

MRK has a Yearly Dividend Yield of 4.17%, which is a nice return.

Compared to an average industry Dividend Yield of 4.19, MRK pays a better dividend. On top of this MRK pays more dividend than 94.95% of the companies listed in the same industry.

Compared to an average S&P500 Dividend Yield of 2.41, MRK pays a better dividend.

		Industry Rank	Sector Rank
Dividend Yield	4.17%

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

45.54% 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.

DP45.54%

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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