Could Merck Stock Quietly Help Turn Steady Dividends Into a Millionaire Retirement?
If you’re at all interested in the pharmaceutical sector, you may be overwhelmed by the opportunity for GLP-1 weight-loss therapies. Sure, that’s an important new drug category, but it isn’t the only story in the drug space.
If you can look past what the lemming-like crowd is focused on, consider digging into Merck (NYSE: MRK). Here’s why this reliable dividend stock could help to slowly make you a millionaire.
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Merck’s current dividend yield is 2.8%. That’s well above the 1.1% yield of the S&P 500 index (SNPINDEX: ^GSPC) and more than a full percentage point higher than the 1.7% yield of the average pharmaceutical stock. That’s a huge difference: Merck’s yield is more than 60% higher than the average drug stock.
Just having a large dividend yield shouldn’t be enough to entice most dividend investors. But pair Merck’s lofty yield with its history of steadily increasing its dividend over the past 35 years, and the story starts to get a lot more exciting.
That said, Merck hasn’t increased its dividend every year; there have been periods when the dividend has been held steady. However, that’s a positive, because it shows that management and the board of directors are willing to support the dividend through difficult times. It recognizes how important dividends are to investors.
Over the past decade, Merck’s dividend has nearly doubled. And the current payout ratio is a very reasonable 45%. More dividend growth seems highly likely in the future, with dividend reinvestment offering the opportunity for compounding over time. And when you retire, you can start using those dividends to pay your bills.
But the real story is the drugmaker’s business. Merck has strong positions in cardiometabolic disease, cancer, and infection care. While some investors are worried about the 2028 U.S. patent expiration for oncology drug Keytruda, the drug has international patents that last into the 2030s. And Merck is working on a pill version that could extend patent protections even further. It has plenty of leeway to both support the dividend and invest in new innovations.
Merck isn’t exciting in the same way as GLP-1 leader Eli Lilly. But it presents an opportunity for investors who use dividends to steadily build wealth over time. Indeed, Merck is a well-run drugmaker that’s quietly rewarding dividend investors for sticking around. If you’re looking to build a seven-figure portfolio, you might want to join in.
