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Merck or AbbVie: Which Company Returns More Value to Shareholders?

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Value returned to shareholders

On its third-quarter earnings conference call, Merck & Co. (MRK) announced a 15% increase in its quarterly dividend to $0.55 per share starting in the first quarter of 2019. The company expects its dividend per share to be $2.20 in 2019.

According to its third-quarter earnings conference call, Merck & Co. returned ~$10 billion to its shareholders in dividends and share repurchases from October 2017 to September 2018. At the end of September 2018, the company had approved a share repurchase authorization worth $18 billion.

According to Merck & Co.’s third-quarter investor presentation, the company has planned capital investments worth $16.0 billion.

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In its 37th Annual J.P. Morgan Healthcare Brokers Conference presentation, AbbVie (ABBV) estimated the rise in its dividend per share from its inception to the end of September 2018 to be close to 168%. In the third quarter of 2018, the company authorized an additional share repurchase program worth $5.0 billion.

Dividend expectations

Wall Street analysts expect Merck & Co.’s dividends per share to be $1.97, $2.16, and $2.19, respectively, in 2018, 2019, and 2020, implying YoY rises of 4.23%, 9.90%, and 1.09%.

On the other hand, AbbVie is expected to report dividends per share of $3.74, $4.29, and $4.60, respectively, in 2018, 2019, and 2020, implying YoY rises of 46.18%, 14.53%, and 7.25%.

AbbVie is thus returning higher dividends per share to its shareholders than Merck & Co.

The five-year average historical dividend yield for Merck & Co. has been 3.28%, while AbbVie’s has been 3.00%. Merck & Co.’s current dividend yield is 2.95%, while AbbVie’s is 4.85%. While Merck & Co.’s historical dividend yield has been higher, AbbVie currently has a much higher yield than Merck & Co.

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