Merck & Co., Inc. (MRK): Big Payout, Little Flexibility

Even Merck’s developmental drugs are under fire. Osteoperosis drug odanacatib has been touted as a potential future blockbuster for the company, but Merck delayed the therapy’s regulatory filing. Odanacatib might not be approved until 2015 now, missing out on a change to take advantage of rival drug patent expirations. Eli Lilly & Co. (NYSE:LLY)‘s standout osteoporosis drugs Evista and Forteo, which combined for more than $2 billion in sales last year, will soon take a hit when Evista loses exclusivity next year.

None of these adverse conditions are enough to threaten a dividend decrease from Merck, an event that’s unthinkable for this blue chip stock. Still, with revenue under fire and a lowered sales outlook for the full year, Merck’s not the safest pick among top dividend payers in big pharma. Its inordinately high payout ratio — particularly when a safer rival like Pfizer Inc. (NYSE:PFE) offers a similar dividend yield at a much smaller ratio — and recent lack of dividend increases make Merck & Co., Inc. (NYSE:MRK) stock a dividend that investors should stay clear of. There are better, safer, and more attractive picks in health care for income investors than this struggling titan.

The article Merck Stock: Not a Safe Pick for Dividend Investors originally appeared on Fool.com and is written by Dan Carroll.

Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

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