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Comparing Dividends and Tax Rates for MRK and GSK in 2019

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Dividend projections

Merck & Co. (MRK) and GlaxoSmithKline (GSK) reported dividends per share of $1.99 and $2.08, respectively, in 2018.

Analysts expect Merck’s dividend per share to rise 14.58% YoY (year-over-year) to $0.55 in the first quarter, 11.46% YoY to $2.22 in 2019, 1.49% YoY to $2.25 in 2020, and 1.02% YoY to $2.27 in 2021.

In its fourth-quarter earnings press release, GlaxoSmithKline guided for a dividend of 80 British pence per quarter in 2019. Expressed in dollars, GlaxoSmithKline’s dividend per share is expected by analysts to fall 0.96% YoY to $2.06 in 2019 as well as in 2020.

Merck is expected to report a higher absolute dividend per share as well as a higher YoY rise in dividends than GlaxoSmithKline from 2019 to 2021. For this reason, Merck may prove to be a better choice for income investors in the coming years.

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Tax rate projections

On its fourth-quarter earnings conference call, Merck guided for a tax rate of 18.5%–19.5% in 2019. Analysts expect Merck’s tax rate to drop 111 basis points YoY to 19.00% in the first quarter, 73 basis points YoY to 19.10% in 2019, and 50 basis points YoY to 18.60% in 2020. They expect it to rise 28 basis points YoY to 18.88% in 2021.

On its fourth-quarter earnings conference call, GlaxoSmithKline guided for an adjusted tax rate of 19% in 2019, similar to what it reported in 2018. Analysts expect GlaxoSmithKline’s tax rate to drop 70 basis points YoY to 19.50% in the first quarter and 50 basis points YoY to 19.50% in 2019. They expect it to rise 30 basis points YoY to 19.80% in 2020 and 20 basis points YoY to 20.00% in 2021.

Merck is expected to report a lower effective tax rate than GlaxoSmithKline from 2019 to 2021.

Next, we’ll discuss key growth drivers for Merck in 2019.

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