By Jeff Reeves
Editor, InvestorPlace.com and The Slant
Merck (NYSE:MRK) is my stock to hold forever as a result of an aging population and its need for more care in the years ahead. Healthcare generally is recession proof, and the sector has baked-in growth as Americans live longer and care gets more complex and expensive.
Specific to Merck, however, I like these factors in particular:
- Reach: MRK is a huge multinational with a $133 billion market cap and over $47 billion in annual revenue.
- Dividend: Merck yields almost 4% annually in dividends, paid since 1935. Plus, its payout ratio is a very sustainable 45%, based on fiscal 2013 earnings.
- Research: Merck bought Schering-Plough in 2009 for $41 billion and followed that up with $7 billion for Millipore in 2010 — two big-time acquisitions that have been slowly worked into operations and should yield new drugs down the road to enrich the pipeline. One big example of a potential blockbuster in the works is its Alzheimer’s treatment moving towards approval.
- Cash: The company also has $18 billion in cash and short-term investments should a development-stage biotech company catch its eye.
If you don’t like to put all your eggs in one basket, the iShares Dow Jones US Healthcare ETF (NYSE:IYH) or the Health Care Select Sector SPDR Fund (NYSE:XLV) are good alternatives. They both include Merck as a top holding along with similar plays like Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ) and Abbott Labs (NYSE:ABT).