Key Takeaways
- AbbVie yields 2.7% and Merck 2.3%, and each raised its dividend about 5% last year.
- Merck’s dividend has more cushion, using 52% of free cash flow over the last twelve months against 66% at AbbVie.
- AbbVie’s Skyrizi and Rinvoq are growing more than 20% with U.S. patents to 2033, while Merck’s Keytruda, about half its sales, faces biosimilars from December 2028.
- Both borrowed heavily for deals in the past year, and both usually announce their next raise between late October and November.
They’re sure taking on lots of debt, aren’t they.
AbbVie (ABBV) closed its $10.9 billion cash purchase of Apogee Therapeutics on Sept. 3, and sold $18 billion of notes this year for it and other deals. Merck (MRK) has been borrowing too, buying Verona Pharma, Cidara and Terns for about $26.4 billion combined.
Where the two split is the patent cliff. AbbVie is already past Humira’s, while Merck’s Keytruda, about half its sales, faces biosimilars in a couple of years – starting in December 2028.
So for a retiree who wants drug-company income, which dividend is the one to own?
| Metric | AbbVie (ABBV) | Merck (MRK) |
|---|---|---|
| Forward dividend yield | 2.7% | 2.3% |
| Annual dividend | $6.92 | $3.40 |
| 5-yr dividend growth | 6.6% a year | 5.8% a year |
| Years of higher dividends per share | 12 (since its 2013 spin-off) | 14 |
| Cash dividend payout ratio, TTM | 66% | 52% |
| Net debt ÷ EBITDA, TTM | 2.06x | 1.60x |
| Interest coverage, TTM | 7.8x | 13.5x |
Source: TIKR, prices at the Sept. 30, 2026 close; annual dividends from each company’s latest declaration.
AbbVie: life after Humira
Humira’s sales fell 49% in 2025 after it lost U.S. exclusivity, but AbbVie had its replacements ready. In the second quarter, Skyrizi and Rinvoq each grew about 24%, to a combined $8.04 billion. Total revenue rose 10% to $16.99 billion.
Both drugs are patented in the U.S. to 2033, and AbbVie doesn’t expect generic Rinvoq before April 2037. Chairman and CEO Robert A. Michael said on the February earnings call that “we are well-positioned to deliver high single-digit revenue growth through 2029.”
That growth funds a dividend that took a comfortable 66% of free cash flow over the last twelve months.
Free cash flow cleared the dividend every year of the decade. The gap did shrink, from $14.21 billion in 2022 to $6.16 billion in 2025, as free cash flow came off its peak and dividends kept climbing. Thinner than it was, but still plenty of room in my book.
The risk is the balance sheet. Net debt is 2.06 times EBITDA, and CFO Scott Reents aims to bring it to 2 times within two to three years of the deal closing. Medicare price-setting (government-negotiated prices on big drugs), which cut Imbruvica sales 29% last quarter, reaches Vraylar in 2027 and Botox in 2028.
Merck: more cushion, bigger cliff
Where AbbVie’s cliff is behind it, Merck’s is still ahead. Keytruda was about $31.6 billion of Merck’s $65.0 billion of 2025 sales. Its main U.S. patent expires in December 2028, and Merck expects Medicare price-setting on it from 2029.
Merck’s answer is Keytruda Qlex, an under-the-skin version patented to 2043. Qlex brought in $463 million in the second quarter, while the IV version slipped about 1%. Total sales grew 5% to $16.61 billion, helped by a 75% jump at Winrevair. Chairman and CEO Robert M. Davis called the patent loss “more of a hill than a cliff.”
Merck’s dividend has more cushion, taking a well-covered 52% of free cash flow over the last twelve months. In 2025 the two were nearly even, with dividends taking about two-thirds of free cash flow at each. Merck’s 2025 cash was held down by $6.1 billion of tax payments, including the final $1.2 billion installment of the 2017 tax law’s transition tax. That’s now paid, and operating cash flow rose to $9.3 billion in the first half of 2026, from $5.8 billion a year before.
Free cash flow fell short of the dividend in 2017 and 2020 but has cleared it every year since. Lumpy, but the last five years look solid to me.
Merck’s debt rose to $53.9 billion by June. At 1.6 times EBITDA, though, it has more room than AbbVie. The bigger risk is how much rolls off at once. Januvia, Bridion and Lenvima lose U.S. exclusivity this year, Lynparza in 2027 and Gardasil in 2028, on top of Keytruda.
So which dividend wins?
For a retiree who wants drug-company income, I’d go with AbbVie. It pays the higher yield (about $270 a year on $10,000, against about $230 from Merck) and has grown its dividend faster over five years. Its two biggest drugs are also growing more than 20% with patents into the 2030s. AbbVie has already lived through its cliff, and that matters to me as much as coverage does.
That isn’t to say Merck’s dividend isn’t safe. It’s the better covered of the two, with less leverage and much stronger interest coverage. It’s just that, when it comes down to it, I’d rather own the drugmaker whose biggest patent loss is already behind it.
Of course, Merck hopes to have 30% to 40% of Keytruda patients on Qlex by 2028. If it gets there, that hill could prove as gentle as management is clearly hoping.
So what is AbbVie stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
