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. 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.

With an excellent Return On Equity value of 36.07%, MRK belongs to the best of the industry, outperforming 96.46% of the companies in the same industry.

With an excellent Return On Invested Capital value of 19.00%, MRK belongs to the best of the industry, outperforming 93.94% of the companies in the same industry.

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

With an excellent Profit Margin value of 27.27%, MRK belongs to the best 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.

MRK's Operating Margin of 33.84% is amongst the best of the industry. MRK outperforms 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 84.85% 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

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 3.78 indicates that MRK is not in any danger for bankruptcy at the moment.

MRK's Altman-Z score of 3.78 is fine compared to the rest of the industry. MRK outperforms 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.

The Debt to FCF ratio of MRK (2.04) is better than 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 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	3.78

ROIC/WACC2.01

WACC9.46%

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%.

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

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

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 9.76, 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.

The average S&P500 Price/Earnings ratio is at 25.25. MRK is valued rather cheaply when compared to this.

MRK is valuated cheaply with a Price/Forward Earnings ratio of 7.62.

90.40% 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 21.27.

		Industry Rank	Sector Rank
PE	9.76
Fwd PE	7.62

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 85.86% of the companies listed in the same industry.

Compared to the rest of the industry, the Price/Free Cash Flow ratio of MRK indicates a rather cheap valuation: MRK is cheaper than 89.39% of the companies listed in the same industry.

		Industry Rank	Sector Rank
P/FCF	11.23
EV/EBITDA	8.13

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)0.53

PEG (5Y)1.21

EPS Next 2Y14.32%

EPS Next 3Y13.3%

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5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 4.33%, MRK is a good candidate for dividend investing.

MRK's Dividend Yield is rather good when compared to the industry average which is at 4.23. MRK pays more dividend than 94.95% of the companies in the same industry.

Compared to an average S&P500 Dividend Yield of 2.37, MRK pays a better dividend.

		Industry Rank	Sector Rank
Dividend Yield	4.33%

5.2 History

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

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

MRK pays out 45.54% of its income as dividend. 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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