Why Merck (MRK) is a Great Dividend Stock Right Now

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.Merck in FocusBased in Rahway, Merck (MRK) is in the Medical sector, and so far this year, shares have seen a price change of -11.86%. The pharmaceutical company is paying out a dividend of $0.81 per share at the moment, with a dividend yield of 3.7% compared to the Large Cap Pharmaceuticals industry's yield of 2.31% and the S&P 500's yield of 1.52%.Taking a look at the company's dividend growth, its current annualized dividend of $3.24 is up 3.8% from last year. Merck has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.95%. Any future dividend growth will depend on both earnings growth and the company's payout ratio; a payout ratio is the proportion of a firm's annual earnings per share that it pays out as a dividend. Merck's current payout ratio is 42%. This means it paid out 42% of its trailing 12-month EPS as dividend.MRK is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $9.03 per share, representing a year-over-year earnings growth rate of 18.04%.Bottom LineInvestors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, MRK is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Merck & Co., Inc. (MRK): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks