Better Dividend: Merck & Co., Inc. (MRK) or Pfizer Inc. (PFE)?

Take them all together, and I see Pfizer faring better in the medium term than Merck.

Both companies are struggling with the loss of key drugs to generic competition, Lipitor for Pfizer, and Singulair for Merck. Pfizer’s revenue in the fourth quarter was down 10%; Merck’s was down 4.5 %

The difference is that Pfizer has a potential savior already on the market. Its blood thinner Eliquis, which it will sell with Bristol Myers Squibb Co. (NYSE:BMY), was approved late last year to treat patients with atrial fibrillation, one of the most common types of abnormal heart rhythm. In clinical trials, Eliquis trounced warfarin, a drug that doctors hate because it’s difficult to find a dose that’s effective, but doesn’t cause excessive internal bleeding. Grabbing a majority of the market shouldn’t be too tough, although it may take awhile, because doctors probably aren’t going to switch many patients taking warfarin if their dose appears to be working.

Merck’s best shot at a megablockbuster is its osteoporosis drug, odanacatib. But the company said a few weeks ago that it wants to wait for long-term safety data before making regulatory applications, pushing an FDA approval into next year. The potential of the drug isn’t as clear as that of Eliquis, because there’s a lot of competition in the osteoporosis market, including cheap generic drugs.

As long as Eliquis reaches its full potential, Pfizer should have a quicker return to solid earnings and revenue growth than Merck. And that should translate to an increase in share price and, hopefully, increased cash flow that the company shares with investors in the form of increased dividends.

The article Better Dividend: Merck or Pfizer? originally appeared on Fool.com and is written by Brian Orelli.

Fool contributor Brian Orelli has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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