Merck & Co., Inc. (MRK), Pfizer Inc. (PFE) & More: Stocks a 106-Year-Old Ben Graham Student Loves the Most

The company made a good move in 2009 when it acquired Schering-Plough for $41.1 billion, as Merck & Co., Inc. (NYSE:MRK) had struggled with patent losses and new drugs with little chance of approval. Schering-Plough has given the company popular consumer brands, including Dr.Scholl’s and Coppertone.

In addition, Merck & Co., Inc. (NYSE:MRK) has expanded its global reach, as around 70% of Schering’s revenue was from overseas markets. At around $45 per share, Merck & Co., Inc. (NYSE:MRK) is worth around $136 billion on the market. The market values Merck & Co., Inc. (NYSE:MRK) quite reasonably at 7.9 times EV/EBITDA. The company also pays good dividends to shareholders, with a decent yield of 3.8%.

But another company is in Warren Buffett’s portfolio

In the pharmaceutical industry, income investors might fall in love with GlaxoSmithKline plc (ADR) (NYSE:GSK). In 2012, it paid out $2.22 dividend per share. It is trading at around $47 per share, with a total market cap of around $113 billion. The company offers a dividend yield of 5.9%. GlaxoSmithKline plc (ADR) (NYSE:GSK) has been famous for consistently increasing its dividend over time.

Over the past ten years, the company has grown its dividend from 0.8 pounds ($1.21) in 2003 to 1.47 pounds ($2.22) in 2012. Although Irving Kahn does not hold GlaxoSmithKline in his portfolio, the company is in the portfolio of many investment gurus, including Dodge & Cox, Joel Greenblatt, Jim Simons, and Warren Buffett. The company has the highest valuation among the three, at 9.2 times EV/EBITDA.

My Foolish take

Income investors might consider buying all three global pharmaceutical companies for their portfolio due to their leading positions, nice dividend yield, and reasonable valuation. It is quite hard to predict their product pipelines and their drugs approval probabilities. Thus, buying them as a group would offer decent diversification for investors.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.