1. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 100
Dividend Yield as of May 12: 3.06%
Topping our list of the Best Blue Chip Dividend Stocks is Merck & Co., Inc. (NYSE:MRK). It is a global health care company working to deliver innovative health solutions through our medicines, vaccines, biologic therapies, and animal health products.
On May 7, Citi analyst Geoff Meacham reinstated coverage of Merck & Co., Inc. (NYSE:MRK) with a ‘Neutral’ rating and assigned the stock a price target of $125, indicating an upside of over 12% from the current price levels.
The move comes after Merck & Co., Inc. (NYSE:MRK) exceeded topline estimates in its Q1 report posted on April 30, supported by the strong demand for its aging cancer immunotherapy Keytruda. Sales of the medicine surged 12% to $8 billion during the quarter, beating estimates of $7.6 billion. Citi views the healthcare firm’s Q1 report as strong, but wants to see favorable clinical catalysts and additional business development before recommending buying the stock.
On the other hand, earlier on May 1, Morgan Stanley analyst Terence Flynn turned more bullish on Merck & Co., Inc. (NYSE:MRK) and raised the firm’s price target on the stock by $3 (read more details here).
Baron Capital, an investment management company, stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q1 2026 investor letter:
“We bought shares of Merck & Co., Inc. (NYSE:MRK), Inc., a large-cap pharmaceutical company. Merck’s largest product in terms of revenue is Keytruda, a cancer therapy which generated over $31 billion of revenue in 2025, representing close to 50% of the company’s revenue. Keytruda loses patent protection in 2028 which will result in biosimilar competition. Merck has been preparing to manage the impact of the Keytruda patent cliff through aggressive business development and pipeline investment. We think management has done a good job particularly with acquisitions and can effectively manage through this period. In fact, over the past five years Merck has acquired five companies which at the time the acquisition was announced the Fund owned, including Acceleron Pharma Inc. (in 2021), Prometheus Biosciences, Inc. (in 2023), Verona Pharma plc (in 2025), Cidara Therapeutics, Inc. (in 2025), and most recently, Merck announced its intent to acquire Terns Pharmaceuticals, Inc. (in March 2026). In addition, Merck also in-licensed ex-China rights to a portfolio of antibody-drug conjugates from Kelun Biotech in 2022, which includes sac-TMT, a very promising TROP2 targeting drug. Including internally developed drugs (such as the oral PCSK9), Merck is launching over 20 new growth drivers which represent a potential commercial opportunity of over $70 billion by the mid-2030s on a non-risk-adjusted basis. Over the next 12 to 18 months, the company will have multiple clinical data readouts across its portfolio, which should add visibility to the company’s ability to fill the sales and earnings gap when Keytruda loses patent protection. Merck trades at a valuation of 12 times through 2029 EPS and we think the multiple will expand as visibility on earnings growth beyond 2029 increases.”
While we acknowledge the potential of MRK to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than MRK and that has 100x upside potential, check out our report about the cheapest AI stock.
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