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A Dangerous Dividend Stock to Sell
3/2/2011 10:00:00 PM
By: Sam Collins
Merck & Co. (NYSE: MRK ) - Following a major advance in the stock market, a period of neutral price action is normal. During this lull, investors should review their holdings and cull out non-performers that are inhibiting overall portfolio profits.
Despite being a global health-care company, Merck is a stock to sell. Not only is the stock still in a bear trend, but the last five years have averaged a negative earnings growth of 33.32%, and current profit margins are at a mere 2.14% in an industry that averages in the teens.
The combined research at TD Ameritrade recently cut their opinion of MRK to "reduce," and that is a good suggestion. Even though the dividend yield is at 4.68%, there is no assurance that it will stay at that level, and an increase in bond interest rates would bring in sellers who have held this stock as a "bond substitute."
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