Pfizer Inc. (PFE), Amgen, Inc. (AMGN), Merck & Co., Inc. (MRK): Why Wouldn’t You Buy These Pharmaceutical Stocks?

Why not look at Merck & Co., Inc. (NYSE:MRK) as a long-term investment?

Merck & Co., Inc. (NYSE:MRK), like Pfizer listed above, is also a Dow component. It’s easy to see why, since the company churns out over $47 billion in revenue and has a market capitalization at approximately $130 billion. This drugmaker has a diversified set of products and sturdy performance, but its stock has been lackluster, with little movement in the past 12 months. Is now the time for opportunistic investors to buy?

I believe it is, when we see that Merck & Co., Inc. (NYSE:MRK) has smashed consensus estimates in each of the last four quarters. Looking deeper, we see the stock is a little pricey, near a 20 trailing P/E, but the forward P/E is far more reasonable at 11, and we’ve seen that analysts have been conservative.

Merck has very strong free cash flow, at approximately $10 billion annually, which has allowed management to raise the dividend yet again this past quarter to a very nice 4.0% yield now.  The company has shown that it is firing on all cylinders the past year and has a shareholder friendly management more than happy to return those profits back to shareholders. I think Merck makes for a nice long-term income investment holding.

The Foolish take:

Investors everywhere are scrambling to find a decent return on investment, as bank accounts, treasuries, and most other fixed investments yield next to nothing. The stable and consistently growing pharmaceutical industry seems to be worth a look as these companies mentioned above — Pfizer, Amgen, and Merck — offer both some nice growth and a great dividend as we wait for that growth to materialize.

The article Why Wouldn’t You Buy These Pharmaceutical Stocks? originally appeared on Fool.com and is written by Brian Gorban.

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