Merck (NYSE:MRK) Has Announced That It Will Be Increasing Its Dividend To $0.73
Merck & Co., Inc. (NYSE:MRK) will increase its dividend from last year's comparable payment on the 10th of April to $0.73. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.
See our latest analysis for Merck
Merck's Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Merck was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 39.9% over the next year. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.
Merck Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.68 in 2013, and the most recent fiscal year payment was $2.92. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Merck has seen EPS rising for the last five years, at 42% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
We Really Like Merck's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Merck that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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