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 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

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.

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

1.2 Ratios

The Return On Assets of MRK (15.14%) is better than 96.46% of its industry peers.

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

MRK has a better Return On Invested Capital (19.00%) than 94.44% of its industry peers.

The Average Return On Invested Capital over the past 3 years for MRK is significantly below the industry average of 42.34%.

		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.

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

The Operating Margin of MRK (33.84%) is better than 94.95% of its industry peers.

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

The Gross Margin of MRK (78.17%) is better than 85.35% of its industry peers.

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

		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

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

The number of shares outstanding for MRK remains at a similar level compared to 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 3.84 indicates that MRK is not in any danger for bankruptcy at the moment.

Looking at the Altman-Z score, with a value of 3.84, MRK is in the better half of the industry, outperforming 78.79% of the companies in the same industry.

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's Debt to FCF ratio of 2.04 is amongst the best of the industry. MRK outperforms 93.94% of its industry peers.

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

MRK has a worse Debt to Equity ratio (0.69) than 65.15% 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	3.84

ROIC/WACC2.01

WACC9.46%

2.3 Liquidity

A Current Ratio of 1.41 indicates that MRK should not have too much problems paying its short term obligations.

The Current ratio of MRK (1.41) is worse than 69.70% of its industry peers.

MRK has a Quick Ratio of 1.16. 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 Quick ratio (1.16) than 69.19% 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	1.41
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

MRK shows a strong growth in Earnings Per Share. In the last year, the EPS has been growing by 258.99%, 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 4.10% in the last year.

The Revenue has been growing by 10.40% on average over the past years. This is quite good.

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

The Earnings Per Share is expected to grow by 6.16% on average over the next years.

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

EPS Next Y17.73%

EPS Next 2Y13.58%

EPS Next 3Y12.74%

EPS Next 5Y6.16%

Revenue Next Year1.68%

Revenue Next 2Y3.64%

Revenue Next 3Y4.27%

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.

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

Based on the Price/Earnings ratio of 9.96, the valuation of MRK can be described as reasonable.

90.40% of the companies in the same industry are more expensive than MRK, based on the Price/Earnings ratio.

Compared to an average S&P500 Price/Earnings ratio of 25.82, MRK is valued rather cheaply.

A Price/Forward Earnings ratio of 7.87 indicates a rather cheap valuation of MRK.

88.38% of the companies in the same industry are more expensive than MRK, based on the Price/Forward Earnings ratio.

MRK's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 21.76.

		Industry Rank	Sector Rank
PE	9.96
Fwd PE	7.87

4.2 Price Multiples

Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 86.36% of the companies listed 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	11.43
EV/EBITDA	8.38

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.

A more expensive valuation may be justified as MRK's earnings are expected to grow with 12.74% in the coming years.

PEG (NY)0.56

PEG (5Y)1.24

EPS Next 2Y13.58%

EPS Next 3Y12.74%

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5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 4.21%, MRK is a good candidate for dividend investing.

MRK's Dividend Yield is rather good when compared to the industry average which is at 4.20. MRK pays more dividend than 95.45% of the companies in the same industry.

MRK's Dividend Yield is rather good when compared to the S&P500 average which is at 2.39.

		Industry Rank	Sector Rank
Dividend Yield	4.21%

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 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

45.54% 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 2Y13.58%

EPS Next 3Y12.74%

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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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