The Dow’s Best Health Care Stock: Merck & Co., Inc. (MRK)

Page 1 of 2

Investing in the health care sector isn’t easy. Where do you start out? From medical device companies to big pharma to small biotech firms bristling with boom-or-bust prospects, it’s tough for investors new to this sector to understand the intricacies unique to health care. Fortunately, there’s an easy place to look for blue-chip, tried-and-true stocks: the Dow Jones Industrial Average .

Four big-time health care stocks call the Dow home, but which one is the best pick for your money? In this five-part series, we’ll take an in-depth look into why each health care stock on the Dow is worth investing in — and in the final installment, we’ll select a winner. Yesterday we took a look at the present and future of big pharma giant Pfizer Inc. (NYSE:PFE); today, let’s check out one of its biggest rivals: Merck & Co., Inc. (NYSE:MRK).

Merck & Co., Inc. (NYSE:MRK)An income investor’s delight
Merck’s recent gains aren’t enough to raise eyebrows, but the stock’s still pleased investors lately. In the past 52 weeks, shares of the big pharma have gained more than 15%. However, things haven’t been so easy in the shorter term: The last three months have seen Merck lose 2.8% as the company struggles with patent expirations and their hit on revenue.

For income investors, however, Merck & Co., Inc. (NYSE:MRK)’s at the top of its game. The company offers a 4% dividend yield, tops among the health care stocks of the Dow and one of the highest-yielding stocks on the index overall. A payout ratio of 78% makes that high yield a pricey endeavor, however.

Growth investors will need to see more, however — particularly as Merck struggles to combat falling sales due to the patent cliff.

The present state of Merck’s drug portfolio
The loss of patent exclusivity on top-selling allergy and asthma blockbuster Singulair has undoubtedly hurt Merck’s pharmaceutical revenue. The drug’s still the company’s second-best-selling therapy, but sales plummeted 30% in 2012 due to generic competition. Merck & Co., Inc. (NYSE:MRK)’s going to have to kick its other medications into high gear in order to make up the more than $1.6 billion in lost sales.

Fortunately, some of Merck’s others therapies are picking up the slack. HPV vaccine Gardasil has come on strong in recent years, posting a nearly 35% gain in 2012 after hitting blockbuster status a year earlier. With Gardasil’s patent exclusivity lasting way down the road until 2028 — and an increasing public awareness about the dangers of HPV recently — count on this vaccine to remain a staple of Merck’s pharmaceutical revenue for years to come.

Merck’s already-on-the-market drug of the future, however, is the Januvia and Janumet family of diabetes therapies. These drugs are already a foundation of Merck’s success, with a combined $5.7 billion in 2012 sales; however, there’s room for even more growth. Don’t expect the diabetes market to slow down any time soon with obesity rates rising across the world. The drug family saw much of its 23% growth last year in the U.S. and Japan, and if Merck can expand that success elsewhere — particularly in emerging markets, no stranger to climbing obesity rates — Januvia and Janumet could make investors forget all about Singulair.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!