While Attention Is on a Pfizer (PFE) Dividend Raise, Merck (MRK) Could Be Ripe for a Hike Too - Analyst

Many market participates expect pharmaceutical giant Pfizer (NYSE: PFE) to raise their dividend following the mid-December board meeting after they cut it earlier in the year to fund the Wyeth acquisition. Now an analyst is asking if Merck (NYSE: MRK) will follow-suit?

In a report today, analysts at Goldman Sachs said the expectations of the Pfizer dividend increase has in large part driven the share price from $12 to $18.

The firm said while all the attention is currently on Pfizer, Merck (NYSE: MRK) is equally, if not more capable, to raise the dividend. They said while Pfizer has the sector's highest free cash flows, "Merck's free cash flows actually accelerate more quickly given a smaller patent cliff to offset."

Since Merck has not raised its dividend since Vioxx troubles surfaced in 2004, Merck now appears ripe to raise it, the report said. The firm said while they are encourage by Merck's current effort to return cash to shareholders, via its $3 billion share repurchase plan and $0.38/share qtr dividend, they argue that the company "can do much more."

Elsewhere in the sector, the firm said Eli Lilly (NYSE: LLY) is most constrained to maintain its dividend and could be susceptible to a dividend cut "if it needs to do a last ditch effort mega deal."

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