MRK - Merck & Co., Inc.

NYSE - NYSE Delayed Price. Currency in USD
84.68
+0.88 (+1.05%)
At close: 4:02PM EDT
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Previous Close83.80
Open83.71
Bid84.28 x 1000
Ask84.82 x 1000
Day's Range83.66 - 84.91
52 Week Range66.10 - 87.35
Volume7,522,217
Avg. Volume8,162,834
Market Cap216.812B
Beta (3Y Monthly)0.32
PE Ratio (TTM)23.75
EPS (TTM)N/A
Earnings DateN/A
Forward Dividend & Yield2.20 (2.61%)
Ex-Dividend Date2019-09-13
1y Target EstN/A
Trade prices are not sourced from all markets
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  • Johnson and Johnson Stock Still Significantly Undervalued
    InvestorPlace

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    Johnson and Johnson (NYSE:JNJ) stock was recently upgraded to Outperform by a Bernstein analyst as "historically cheap." JNJ stock is off its 52-week highs almost 12%. It seems the market has basically discounted in its present legal issues and potential liabilities.Source: Sundry Photography / Shutterstock.com Investors should consider the company's underlying strengths both as a pharmaceutical company and a consumer. The pharma segment accounts for half of its revenues and profits. JNJ Stock Benefits From Powerful Free Cash FlowIn JNJ's latest 10-Q report, it reported almost $9.5 billion in operating cash flow for the six months to June 30. After deducting $1.49 billion in capital expenditures, JNJ's free cash flow (FCF) was $8 billion. That works out to $16 billion annually.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Beverage Stocks to Buy Now Johnson and Johnson's dividends cost only $4.9 billion in the first half, or $9.8 billion annually. That is just 61% of its annual $16 billion FCF. In fact, JNJ spent $4.7 billion on share buybacks or 59% of its FCF.That means JNJ's return of capital payments to shareholders are greater than its FCF. These represent $9.6 billion in total payments in the first half. Annualized that works out to $19.2 billion, or 5.5% of the Johnson and Johnson stock market value. JNJ Can Afford the Legal Fines and Excess Return of CapitalJohnson and Johnson can afford to both pay out more than its FCF to shareholders in dividends and share buybacks as well as any litigation settlements. It has at least four ways to do this.For example, it can sell or dispose of assets to raise cash, draw down its cash and securities balances, increase debt, or use share issuances (from employee options). Often JNJ will use a mixture of all of these, especially if it also decides to purchase smaller companies at the same time.In case it has to pay out legal settlements or penalties, JNJ may have insurance and certain reserves to protect itself. Analysts assume that the company will use a mixture of all these methods to also pay the legal liabilities that may eventually arise.Bernstein's analyst report indicates that JNJ's maximum settlement exposure is no more than $50 billion. Even if it had to pay this amount all at once, which is highly unlikely, Johnson and Johnson could afford to take on debt to pay this amount.For example, JNJ has $155 billion in assets, including $15 billion in cash and securities, and only $27 billion in long-term debt. This leaves ample room, including with its free cash flow, to pay a worst-case scenario of $50 billion. JNJ Stock Is Undervalued Compared to PeersJNJ's market value of $346 billion. It has a FCF yield of 4.6% ($16 billion divided by its $346 billion market value) and a total yield of 5.5% (dividends and buybacks divided by the market value).JNJ's FCF yield is higher than peers its size. For example, Pfizer (NYSE:PFE) produced operating cash flow of $4.3 billion in the six months to June 30. Since capex was $939 million its FCF was $3.37 billion or annualized $6.7 billion. Since PFE stock's market value is $200 billion, its FCF yield is just 3.37%.The same is true with Merck (NYSE:MRK). MRK produced $3.04 billion in FCF in the first half of 2019 and its market value is $216 billion. So that gives it a FCF yield of just 2.8%.JNJ's stock market value is larger than both PFE and MRK. Its FCF yield is also higher. This means the Johnson and Johnson stock price is very undervalued compared to its large peers. JNJ Has Credibility From Its Tylenol Decision Decades AgoJNJ still holds a lot of "street credibility." This is due to JNJ's 1983 decision to recall all Tylenol bottles when one was criminally tampered with. In the March-April 1994 issue of Harvard Business Review, Lynne Payne, a Harvard Business school professor, wrote about Johnson and Johnson's famous Tylenol recall decision, in her article,"Managing for Organizational Integrity." She points out that integrity was not just with the CEO's integrity, but all JNJ's employees:"For example, Johnson & Johnson's handling of the Tylenol crisis is sometimes attributed to the singular personality of then-CEO James Burke. However, the decision to do a nationwide recall of Tylenol capsules in order to avoid further loss of life from product tampering was in reality not one decision but thousands of decisions made by individuals at all levels of the organization. The "Tylenol decision," then, is best understood not as an isolated incident, the achievement of a lone individual, but as the reflection of an organization's culture. Without a shared set of values and guiding principles deeply ingrained throughout the organization, it is doubtful that Johnson & Johnson's response would have been as rapid, cohesive, and ethically sound."I believe that Johnson and Johnson company still benefits from this aura of integrity, at least on Wall Street. JNJ stock has not completely fallen out of bed despite its huge legal challenges. In other words, it's not just the financial strength of the company that upholds Johnson and Johnson stock. It's also JNJ's reputation for integrity. Stay Tuned for JNJ Stock Reaching Intrinsic ValueJohnson and Johnson will announce its third-quarter results on Oct. 15. Watch to see what JNJ believes its ultimate settlement exposure may be. Also, look at whether it is continuing to spend more on dividends and share repurchases than its free cash flow.That will be a good sign showing what management believes about the Johnson and Johnson stock price. A dividend increase and further buybacks will show that JNJ's stock price is still selling well below its intrinsic value.As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Mark Hake runs the Total Yield Value Guide which you can review here. The Guide focuses on high total yield value stocks, which includes both dividend and buyback yields. In addition, subscribers a two-week free trial. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Beverage Stocks to Buy Now * 10 Groundbreaking Technologies Created by Universities * 5 Semiconductor Stocks Worth Your Time The post Johnson and Johnson Stock Still Significantly Undervalued appeared first on InvestorPlace.

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  • Wall Street Loves These “Strong Buy” Dividend Stocks
    TipRanks

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    Stock go up, investor happy. Stock go down, investor... sad?Probably. In fact, we'd go so far as to say that's probably the ordinary reaction an investor has to a decline in the share price of a stock he or she owns -- but not all the time.You see, if the stock is question is a dividend stock, even a decline in stock price can be offset by the value of the dividend you're being paid to own it. What's more, because a stock's dividend yield is calculated by dividing the dividend amount by the stock price, the lower the stock price falls, the bigger the dividend yield becomes -- making the stock increasingly attractive to other dividend investors, and providing a backstop that can prevent the stock falling further!So how do you find great dividend stocks, popular on Wall Street, and attractive to dividend investors?Using the Stock Screener at TipRanks, you can screen for stocks rated "strong buy" by Wall Street analysts, and screen, too, for stocks paying better-than-average dividend yields. Combine these two attributes, and voila! You've got a great dividend stock candidate. Here are three of them:Sanofi (SNY) One of Europe's largest drugmakers, Paris-based Sanofi boasts a market capitalization north of $112 billion, more than $40 billion in annual sales, and net profits approaching $4 billion. Sanofi stock's a great cash generator as well, throwing off nearly $6.3 billion in cash over the last 12 months, enabling it to pay a market-beating dividend yield of 3.9%.Just recently, Morgan Stanley analyst Mark Purcell upgraded Sanofi shares to "overweight," calling the stock a "defensive" play in an uncertain market. According to Purcell, the stock is "largely de-risked" -- indeed, the analyst says Sanofi has the lowest risk growth outlook of any European Big Pharma stock, due to a lack of big drugs losing patent protection in the near future (the dreaded "patent cliff"), and a pipeline of new drugs in late-stage clinical trials that could soon come to market.Whereas the consensus on Wall Street is that Sanofi stock is worth $52 per share, Purcell thinks Sanofi could go all the way to ... $98 a share! (To watch Purcell's track record, click here)"We argue that new CEO Paul Hudson inherits significant optionality to unlock shareholder value alongside the recent CFO and CSO appointments. The management team can draw on their shared experience from the strategic transformations of AstraZeneca and Novartis, the new chapter of innovation at Roche and the cost discipline of Peugeot. The evolution of the GSK equity story, with which Sanofi has much in common, albeit with greater balance sheet flexibility and lower patent risk, offers a further yardstick for investors, we believe. We explore potential strategic options that could in theory help to close the 15% relative P/E multiple discount," Purcell said.Sanofi stock hasn't moved much over the past year, up less than 4%. Regardless, Wall Street loves Sanofi stock, rating it "strong buy" on average, and with a $52 price target implying 14.5% upside from today's prices. Factor in the dividend, and you're pushing 18.5% potential profit. (See Sanofi stock analysis on TipRanks)Merck (MRK) But you needn't travel all the way to Europe to find an attractive drug stock paying a big dividend. Right here at home, Kenilworth, New Jersey-based Merck & Co. pays its shareholders a very respectable 2.7% dividend yield. (The average stock on the S&P 500 is only paying 2%).Recently, Merck presented more positive data at ESMO supporting the use of Keytruda + chemo to treat neoadjuvant/adjuvant TNBC. These data, along with other data presented at ESMO, like BMY's (NC) Merck-227 data and the Lynparza ovarian data, support MRK's leadership in oncology.Morgan Stanley analyst David Risinger commented, "KN-522 demonstrated an impressive pathologic complete response (pCR), improving on results from its earlier exploratory KN-173 trial. On another key efficacy metric, event free survival (EFS), the trend to 18mo looks quite favorable but the trial’s discussant urged a measure of caution in over-interpreting the findings, saying data were too early still and need to mature. The reason for caution is that discontinuation rates were ~2x for Keytruda vs placebo (PBO), raising the specter that longer-term survival curves may look different than shown at the first, early look, if too many patients are stopping therapy prematurely. The discussant also reminded that certain immune-related adverse events would likely be permanent, implying a more definitive calculation of risk:benefit is warranted, but this is not yet possible from the preliminary data set."As a result, Risinger reiterated an Overweight rating on MRK stock with $90 price target, which implies nearly 7% upside from current levels. (Watch Risinger's track record, click here)Overall, the consensus targets on the Street see Merck shares rising as high as $100 per share over the next 12 months, 18% above current levels. (See Merck stock analysis on TipRanks)Verizon (VZ) Switching gears now from the somewhat esoteric world of biotech to a company we're all very familiar with, Verizon is our final stock to look at in today's column -- and for good reason.Investors have long viewed the telecom industry as a happy hunting ground for stocks paying robust dividends, and Verizon, which pays 4.2%, is no exception. In fact, Verizon has raised its dividend for 13 years in a row, with its latest dividend hiking coming just last month. At 4.2%, Verizon's dividend is now more than twice the market average.One analyst who likes Verizon more than most is Oppenheimer's Timothy Horan, who in August upgraded Verizon shares to "outperform" with a $70 price target implying better than 16% upside (and better than 20% with the dividend added in). Horan believes that Verizon will be an early beneficiary of the telecommunications industry's move to 5G wireless technology. And anticipating customer defections from T-Mobile and Sprint once those two companies merge, Horan predicts that Verizon will also benefit from customer "churn" at this wireless rival. (To watch Horan's track record, click here)Overall, Wall Street loves the stock, giving Verizon "strong buy" ratings by and large. Granted, with a consensus price target of "only" $65, most analysts don't see a huge amount of upside in the stock -- only about 9%. But if you add in the dividend yield, the potential profit on this one exceeds 13%, and maybe even more.Topping it all off, with a P/E of less than 16, Verizon's not just the biggest dividend payer on today's list of highly-rated dividend stocks -- it's also the cheapest. (See Verizon stock analysis on TipRanks)

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