We recently compiled a list of the 8 Best American Dividend Stocks To Buy Right Now. In this article, we are going to take a look at where Merck & Co., Inc. (NYSE:MRK) stands against the other American dividend stocks.
The US economy expanded by 2.8% in the third quarter of 2024, as reported in the Advance GDP release from the U.S. Bureau of Economic Analysis. This marked the ninth straight quarter of growth in real GDP. While the third-quarter increase was robust, it slightly lagged behind the 3% growth recorded in the second quarter of 2024. Economists polled by Dow Jones had anticipated a 3.1% rise.
Regardless of market conditions, investors frequently seek to minimize risk in their portfolios, and investing in dividend stocks is a reliable approach to achieve this. A report by S&P Dow Jones Indices highlighted the growing significance of dividends as a source of personal income. Over time, dividend income has steadily risen, increasing from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024. In contrast, interest income has seen a decline, dropping from 14.58% to 7.61% during the same period.
Also read: 8 Best Dividend Kings To Invest In For Safe Dividend Growth
The Dividend Aristocrat Index, which tracks the performance of companies with 25 consecutive years of dividend growth, has surged by over 10% since the start of 2024, underperforming the market. Although dividend stocks may not have been hitting it out of the park this year, US companies have remained dedicated to rewarding shareholders by consistently paying dividends. According to a report by S&P Dow Jones, for the 12-month period ending in September 2024, US common dividend increases totaled $74.7 billion, marking a 16.9% rise from the $63.9 billion recorded in the same period a year earlier, ending in September 2023. The report also mentioned that in the third quarter of 2024, there were 480 dividend increases reported, marking a 7.1% rise compared to the 448 increases in the same period in 2023. The total value of these dividend hikes amounted to $14.1 billion for the quarter.
WisdomTree offers an interesting perspective on global dividends in its report. According to their findings, the global equity market currently distributes around $1.6 trillion in dividends, an increase from approximately $1.5 trillion last year. Notably, 55% of these dividends come from outside the US, which is about 15% more than the non-US share in market cap-weighted indexes. On the other hand, US companies account for 44% of global dividends, which is considerably less than their 63% share of global market capitalization. This suggests that non-US markets are more heavily weighted in dividend-focused indexes, while US exposure is relatively lower. For instance, European countries make up about a quarter of global dividend payments, which is 10% more than their share of the global market cap.
That said, the start of dividend payments by several major US tech companies contributed an additional 1.1 percentage points to the global growth rate in Q2, as reported by Janus Henderson’s Global Dividend Index report. The report also mentioned that the contribution from these new dividend payers will persist throughout the remainder of the year, ensuring that US payout growth remains ahead of the global average. In view of this, let’s take a look at some of the best American dividend stocks.
Our Methodology:
We created this list by scanning Insider Monkey’s Q3 2024 database for US companies that have consistently increased their dividends for at least 10 years and are traded on American stock exchanges. Then, we chose stocks with dividend yields above 2% as of December 10. Finally, we selected the top 8 companies with the most hedge fund investors in Q3 2024 from the refined dataset.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of a person’s hand holding a bottle of pharmaceuticals.
Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 86
Merck & Co., Inc. (NYSE:MRK) is a New Jersey-based pharmaceutical company that provides innovative health solutions to its consumers. The company’s flagship cancer drug, Keytruda has been approved for numerous indications. Recently, the company reported that a Phase 3 trial evaluating Keytruda for a specific type of ovarian cancer achieved its primary goal of improving progression-free survival but fell short of meeting the secondary goal of extending overall survival. Currently, Keytruda is approved in the US for 40 different oncology indications. Merck is actively working to secure similar approvals for the drug in key international markets, including the European Union and Japan, where these indications are not yet authorized.
In the third quarter of 2024, Keytruda sales grew by 17% from the same period last year, reaching $7.4 billion. This was also highlighted by GreensKeeper Asset Management in its Q3 2024 investor letter. Here is what the firm said:
“Merck & Co., Inc. (NYSE:MRK) was our second-largest detractor this quarter, declining -8.3%. MRK’s leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company’s $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.”
Overall, Merck & Co., Inc. (NYSE:MRK) reported revenue of $16.66 billion, which showed a 4.3% growth from the same period last year. The company’s pipeline continues to progress and grow, reflecting its ability to establish a sustainable innovation framework and positioning it with a more diversified portfolio to support future growth.
On November 19, Merck & Co., Inc. (NYSE:MRK) declared a 5.2% hike in its quarterly dividend to $0.81 per share. Through this increase, the company stretched its dividend growth to 14 years, which makes it one of the best dividend stocks on our list. The stock supports a dividend yield of 3.21%, as of December 10.
Insider Monkey’s database of Q3 2024 showed that 86 hedge funds owned stakes in Merck & Co., Inc. (NYSE:MRK), down from 96 a quarter earlier. These stakes have a collective value of more than $7.1 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q3.
Overall MRK ranks 1st on our list of the best American dividend stocks to buy right now. While we acknowledge the potential for MRK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MRK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.