In this article, we will discuss dividend stock portfolio: 5 stock picks by hedge funds. If you want to read our detailed analysis of these stocks, go directly to Dividend Stock Portfolio: 10 Stock Picks by Hedge Funds.
5. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 79
Dividend Yield as of November 10: 3.14%
Merck & Co., Inc. (NYSE:MRK) is a leading pharmaceutical company operating for the last 130 years. The company’s dividend has grown at an average rate of 5.5% in the past ten years and the payout ratio stands at 45%. The company has been at the forefront in coming up with treatments for deadly diseases like Ebola and HIV.
Now Merck is leading its effort against the COVID-19 pandemic. Although the company was unsuccessful in developing a vaccine against the COVID-19 virus but is the first to come up with an antiviral known as molnupiravir to treat COVID-19.
On November 9, Merck & Co. Inc. (NYSE:MRK) announced that the US government will buy 1.4 million more doses of molnupiravir for nearly $1 billion, taking the total doses ordered to 3.1 million doses. However, the order will only be exercised if the drug receives Emergency Use Authorization (EUA) or receives complete approval from the FDA. Merck’s drug against COVID reduces the chances of hospitalization or death by 50% for patients suffering from mild to moderate COVID-19.
Artisan Partners shared its insights on Merck & Co. Inc. (NYSE:MRK) in its Q2 2021 investor letter. Here’s what the fund had to say:
“In Q1, we initiated a position in Merck, a provider of health care solutions including prescription medicines, vaccines, biologic therapies, animal health and consumer care products. We purchased Merck when the stock came under pressure in part on concerns that the newly minted Biden administration could implement regulatory changes and lower drug costs in the pharmaceutical industry. Recent, but anticipated changes to Merck’s management team have also weighed on shares, as have concerns over the company’s heavy reliance on immunotherapy treatment Keytruda. Notably, Merck is not getting much credit from investors for the 60+ programs it has in clinical development, despite having several solid and large new product opportunities. Additionally, the company’s strong balance sheet and robust free cash flow provide it multiple options for future partnerships and acquisitions. While Merck is undergoing a period of transition, we think the company’s fundamentals are strong and believe changes to management should be a catalyst for improvement.”
Merck & Co. Inc. (NYSE:MRK) has also reached an agreement with the Japanese government to supply 1.6 million doses of molnupiravir for $1.2 billion. However, the deal is also dependent on approval from Japan’s Pharmaceuticals and Medical Devices Agency. It would be interesting to note that the UK’s Medicine and Healthcare Regulatory Agency has given the approval to molnupiravir to be used as the first antiviral for the treatment of COVID-19.
