Hold Merck for Its Solid Dividend and Covid-19 Treatment Prospects

Dividend Stocks

For folks who like to sit on a stock and collect dividends for years, pharmaceutical giant Merck (NYSE:MRK) is a go-to investment. MRK stock is rock-solid: low in volatility and high in market capitalization, it’s appropriate for many risk-averse investors.

Merck (MRK) logo outside of corporate building

Source: Atmosphere1 / Shutterstock.com

On the other hand, the onset of the Covid-19 pandemic added an element of risk to all stock-market holdings. This is particularly true with pharma-market large-cap businesses, all of which responded to Covid-19 in different ways.

Thankfully, it’s fair to say that Merck’s response has been timely and aggressive. And while MRK stock isn’t an obvious “vaccine stock” like some others are, the company is certainly doing its part to combat the virus.

All in all, even in these challenging times, you’ll find that Merck continues to reward loyal shareholders with generous distributions and a favorable value proposition.

A Closer Look at MRK Stock

Patience really is the key if you’re going to buy and hold MRK stock for the long term.

The past 12 months have been unusually choppy in terms of price action. This is to be expected, though, as stocks don’t just go straight up every year.

Still, Merck shares indicate a 52-week range of $68.44 to $83.78, which isn’t extremely wide.

Plus, MRK stock has a five-year monthly beta of 0.41, which means that it has historically moved much slower than the overall stock market.

Now, here’s something that income-focused investors should appreciate. Merck currently offers a forward annual dividend yield of 3.3%. That’s a nice bonus if you plan to sit on your shares for a while.

MRK stock is trading at just under $75. That’s fairly close to the middle of its 52-week range.

One strategy could be to wait until the share price pulls back to the bottom of the range. However, if you plan to hold the stock for years and collect the dividend distributions, it’s perfectly fine to start buying Merck shares now.

Contributing Through a Partnership

Merck isn’t known as a primary Covid-19 vaccine maker. However, this doesn’t mean that Merck isn’t contributing to the battle against the virus.

In fact, a division of the U.S. Department of Health and Human Services has committed to provide Merck with funding of up to $268.8 million.

This funding will be “to adapt and make available a number of existing manufacturing facilities for the production of SARS-CoV-2/COVID-19 vaccines and medicines.”

Moreover, Merck has entered into agreement to support the manufacture and supply of Johnson & Johnson’s (NYSE:JNJ) Covid-19 vaccine.

Sanat Chattopadhyay, executive vice president and president of the Merck Manufacturing Division, emphasized his company’s continued commitment to making Covid-19 vaccines widely available.

“At Merck, we have a rich legacy in vaccine manufacturing and look forward to combining our expertise with Johnson & Johnson to help increase supply and expand access to authorized SARS-CoV-2/COVID-19 vaccines,” Chattopadhyay commented.

Investigating a Treatment

The Johnson & Johnson collaboration isn’t Merck’s only contribution to the fight against the pandemic.

Recently, Merck released an important announcement concerning molnupiravir. That’s an investigational oral therapy being studied for outpatient use early in the course of Covid-19.

Currently, molnupiravir is currently being evaluated in a Phase 3 clinical trial. The purpose is to evaluate molnupiravir’s potential to reduce the risk of hospitalization or death from Covid-19.

It has already been “shown to be active in several models of SARS-CoV-2, including for prophylaxis, treatment and prevention of transmission.”

Reportedly, the earliest possible submission for an emergency use authorization for molnupiravir will be in 2021’s second half.

And here’s an encouraging development. Evidently, the U.S. government will purchase approximately 1.7 million courses of molnupiravir upon the issuance of an emergency use authorization or approval by the U.S. Food and Drug Administration.

The Bottom Line

When people think of “Covid stocks,” Merck might not be the first name that comes to mind. That’s perfectly fine, as Merck is still aggressively battling against the disease.

Along with that, MRK stockholders should appreciate the company’s consistent dividend payouts.

The stock doesn’t always move fast, I’ll admit. Still, a buy-and-hold position should yield steady returns for patient investors.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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