#4: Merck (MRK)
Click to EnlargeDividend Yield: 3.5%
YTD Performance: +20%
Just as rival Pfizer got hooked on Lipitor, Merck (MRK) became addicted to Singulair, and the weaning process has been painful. The blockbuster allergy and asthma medication was the 11th-best-selling drug in the world until Merck lost exclusive rights to sell it last year and cheaper generics swamped the market.
Shares are up just 20% for the year-to-date, and the valuation looks stretched at 14 times forward earnings when the five-year average is closer to 10. MRK also looks a bit pricey on a trailing earnings basis, and by price/earnings-to-growth (PEG).
But that generous 3.5% yield on the dividend still makes Merck look like a core equity-income holding, especially considering the very low volatility. Indeed, MRK is about half as volatile as the broader market.