Merck & Co., Inc. (MRK) vs. Verizon Communications Inc. (VZ): Which Dow Jones Industrial Average (.DJI) Stock’s Dividend Dominates?

Round four: strength
A stock’s yield can stay high without much effort if its share price doesn’t budge, so let’s look at the growth in payouts over the past five years. If you bought in several years ago and the company’s grown its payout substantially, your real yield is likely look much better than what’s shown above.

MRK Dividend data by YCharts

Winner: Merck, 1-3.

Round five: flexibility
A company — even one as well-positioned as these — needs to manage its cash wisely to ensure that there’s enough available for tough times. Paying out too much of its free cash flow in dividends could be a warning sign that the dividend is at risk, particularly if business weakens. This next metric analyzes just how much of their free cash flows our two companies have paid out in dividends over the past four quarters:

MRK Cash Div. Payout Ratio TTM data by YCharts

Winner: Merck, 2-3.

Despite a valiant late-game effort, Merck comes back too late to take top honors. You could argue that Merck deserves the point for endurance, but that isn’t an argument I’d want to have with any dedicated long-term Ma Bell shareholders. Do you think Merck & Co., Inc. (NYSE:MRK) got the short end of the stick today? Will pills beat cell phones for shareholders in the end? Let me know if you agree or disagree with these results by leaving a comment below.

The article Merck vs. Verizon: Which Dow Stock’s Dividend Dominates? originally appeared on Fool.com and is written by Alex Planes.

Fool contributor Alex Planes and The Motley Fool have no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.