Nothing is lock-safe in this world, but with another bad jobs report ruffling feathers and Intel (INTC) and FedEx (FDX) predicting a length of economic pain, Merck's (MRK) nearly 4% dividend is looking better by the day.
The market sensed all this on Thursday, with the stock rising strongly. But it was down again on Friday on the heels of a typically directionless Merck week, during which an analyst reiterated his "Neutral" rating, the Wall Street equivalent of kissing your sister.
Even over the next couple of days though, as traders wait on QE 14, or 15, or 16, (I've lost count) then realize the first however-many didn't work so why will the next, Thursday's flight to the relative safety of Merck's dividend will resume.
That's why we are suggesting going against the grain and gravitating back into Merck, a rusty stalwart of a company, which so many analysts think will merely run in place.
You need to put Merck in the context of a degrading economy, and set it against other dividend payers. AT&T (T) and Verizon (VZ) offer better payouts, but you have to weather the risks of a fast moving field that is, in several aspects (i.e. landlines, exclusivity to certain Smartphones) moving away from them. Vodafone (VOD), too, offers more, but for the price of significant European risk. Intel, which just warned, pays about the same, and JPMorgan (JPM), with the abundant risks of the financial sector, is also in the running. Even Johnson & Johnson (JNJ) and Pfizer (PFE) are nearly a match even though both, as we'll touch upon in a moment, are relative slouches in the drug research department. Moreover, Merck is a consistent payer. In fact, Merck defines dedication to dividend payment. They have not decreased their dividend since the Clinton-Gore era.
But back to that economy. A week that will start with the foreboding sense that even FedEx, the ultimate in cyclicals which should even be enjoying the boost of more online shopping deliveries, is turning weary and end with Friday's retail sales report, should reward flights to comparative steady safety.
In fact, if Friday's retail report resembles the jobs report, as it very well might, even Apple's (AAPL) Wednesday iPhone announcement will fade to the background.
Meanwhile, Merck, for its part, is not without its flaws. But we're not necessarily talking about owning it until the end of time. Besides, unlike many drug companies with relatively bare drug cupboards -- and, yes, Pfizer, I'm talking to you -- Merck has been growing out its research and development spending in the search for path breaking drugs, far outpacing its rise in revenue.
That has hurt earnings over the short-haul. It has also, though, bred confidence and good faith from traders, who are predisposed to like Merck, even if the stock has been largely unloved by analysts.
Despite the fact that the economy, according to jobs reports and companies with the best feel of the situation of the ground, is unspooling, sparking the need for a dividend rich refuge, the stock has barely budged in a month's time. Moreover, out of about a dozen analysts who cover the stock, only one rates it a buy.
About half rate it a "Hold," when "Buy" is the norm on Wall Street.
As sentiment on the economy turns down, it will turn up for Merck, which is why, all told, we're going against the grain and suggesting buying it.