Use This Market Opportunity to Unload Merck

Written by The Dividend Guy on April 22, 2006

After a lot of deliberation, I have decided that I am going to sell my Merck stock and focus on finding a better place for that money.

The lawsuits are going fast and furious, and Merck does not seem to be faring well. This article discusses the 71-year old man that Merck now has to pay $32-million. I know, they will appeal and it may be overturned. However, what is really bothering me is the number of dollars that Merck is going to have to pay out for legal fees to fight the various legal battles it is now involved it. This article discusses that there is no clear trend in which way the decisions are going, but that the liability could hit $50-billion. What is going to happen to my dividends if they need to pay this out?

My thoughts are that Merck is going to try it’s hardest to keep the dividend intact, but that the string of dividend increases will be few and far between. I just cannot see how they can support increases going forward. Add that with Zocor losing U.S. market exclusivity in June and sales will likely drop as well.

Bottom line - I think that I can find better places for my investment money. I already own Pfizer so am exposed to healthcare already so I may just add to some existing positions. I will let you know what I decide to do.


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4 Comments so far

  1. Black April 22, 2006 9:29 am

    Hi DivGuy,

    At first, it’s very difficult to watch a stock go on such a run when you had either good intention to buy or looked at a chart and said to your self this is going to take off. The great thing about the stock market is there’s always another stock or index that will do the same thing. Good trading.

    Regards
    Black
    www.leverageyoureffort.com

  2. yielder April 22, 2006 9:00 pm

    An index fund spreads the risk - XLV, VHT, IYH, IXJ. If you want a stock replacement, JNJ is a thought - http://www.dividendgrowth.org/StockIdeas/JNJ.pdf

  3. G April 25, 2006 3:48 pm

    First of all, I enjoy reading your posts. Next, I agree with you that this is probably a good time to get rid of MERCK. I read a report that states the company will handle each claim one at a time. So far I’ve seen two claims and two large rewards, and two dips in MERCK stock. I’ve added a link to your site on my blog.

  4. The Dividend Guy Blog - One Guy’s Journey to Passive Income Through Dividend Investing » One Investor Sells, Another Investor Buys October 28, 2006 8:21 am

    […] Around September 2005, 2million made a purchase of Merck on the weakness that the stock had gone through since the Vioxx problems. If you remember, I chose to sell the stock 8 months later on the worries with the Vioxx lawsuits. Although I admit the timing of this is not necessarily a one for one exchange of shares, I think it does highlight the fact that people analyze stocks with different assumptions and come up with different perspectives on the future prospects of the company. 2million believed, and it appears he still does as he transferred his shares recently to a Sharebuilder account, that Merck’s prospects are good and the gains he has received will hold and grow in the future. I do not know, as I have not looked at the shares since I sold. I have just chalked that one up as poor timing on my part. […]

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