Although this high-profile pharmaceutical company isn't exactly a stranger to the pages of Pick of the Day, we think Merck (MRK) is worth another mention in light of the President's proposal to stop taxing dividends.
Market watchers can't say exactly how eliminating income taxes on dividends would affect the economy. But Goldman Sachs investment strategist Abby Joseph Cohen speculates that should the proposal become law, dividend-paying companies would see a boost in their share prices and average dividend payouts would probably rise.
The maker of Zocor, Vioxx and Singulair already pays shareholders 2.4% annually, or $1.44 per share. Merck has raised its dividend 16 years in a row, and is likely to keep doing so, given its strong financials.
The stock is among the top holdings of two five-star rated funds, Ameristock and Jensen Portfolio. The managers of both funds look for stalwart, blue-chip companies with rising sales and income. The managers of Jensen in particular like Merck for its long history of double-digit return on equity.
Last month, Merck raised its 2003 earnings guidance to between $3.40 and $3.47 per share, versus analysts' consensus estimate of $3.37. The stock trades at about 17 times the company's 2003 estimated profits.
