Key Takeaways
- Pfizer yields 5.7% against Merck’s 2.3%, so $10,000 in Pfizer pays $570 a year today, compared with $230 in Merck.
- Merck’s dividend used 66% of its free cash flow over the twelve months to Sept. 30, 2026, while Pfizer’s used 89% over the twelve months to June 28, 2026.
- Merck’s dividend grew 5.8% a year from fiscal 2020 to fiscal 2025, and Pfizer’s annual dividend of $1.72 a share is the same as it was in fiscal 2025.
- At each stock’s 5-year growth rate, Merck’s dividend income wouldn’t pass Pfizer’s until about 2056.
Merck (MRK) and Pfizer (PFE) both raised their 2026 outlooks in the past week: Merck with its third-quarter results on Oct. 29, and Pfizer with its own on Nov. 3.
Their dividends tell different stories. Pfizer yields 5.7%, more than twice Merck’s 2.3%. Merck now pays $3.40 a share a year, up from $3.28 in fiscal 2025. Pfizer declared its fourth-quarter dividend on Oct. 6 at $0.43 a share, which keeps its annual payout at $1.72, the same as in fiscal 2025.
So which is the better dividend stock: the bigger check, or the one that’s still growing?
| Metric | Merck (MRK) | Pfizer (PFE) |
|---|---|---|
| Dividend yield | 2.3% | 5.7% |
| Dividend growth, fiscal 2020-2025 | 5.8% a year | 2.5% a year |
| Cash dividend payout ratio (TTM) | 66% (to Sept. 30, 2026) | 89% (to June 28, 2026) |
| Net debt/EBITDA (LTM) | 2.9x | 2.0x |
| Interest coverage (LTM) | 5.2x | 7.0x |
| Forward P/E (NTM) | 17x | 11x |
Source: TIKR, Nov. 5, 2026.
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Merck’s dividend has room to grow
Merck’s third-quarter sales came to $18.1 billion, up 5% from a year earlier. Keytruda and Keytruda Qlex brought in $8.6 billion of that, up 6%, and Winrevair sales rose 93% to $694 million. Older drugs like Januvia and Bridion keep shrinking as generics take share. Merck narrowed and raised its full-year adjusted EPS outlook, and it expects moderate sales growth in 2027.
That business covers the dividend with room to spare. Over the twelve months to Sept. 30, 2026, dividends used a well-covered 66% of Merck’s free cash flow.
Free cash flow topped the dividend every year from fiscal 2021 to fiscal 2025, while dividends paid climbed from $6.61 billion to $8.18 billion:
CFO Caroline Litchfield said on Merck’s third-quarter call, “We remain committed to the dividend with the goal of increasing it over time.” The coverage gives her plenty of room to do it.
The main risk is Keytruda, nearly half of third-quarter sales, losing patent protection. Litchfield described that as “really more of a hill on the overall revenues of our company as we will, in short order, then return to strong growth.” Merck also carries more net debt: 2.9x EBITDA, against Pfizer’s 2.0x.
Pfizer’s bigger check sits on a thin cushion
Pfizer’s yield is more than twice Merck’s, but its dividend has far less cash behind it.
Pfizer’s third-quarter revenue of $16.6 billion was relatively flat from a year earlier, operationally. Launched and acquired products grew 32% operationally and Eliquis grew 25%, while Paxlovid fell 63% and the Prevnar family fell 10%. On Nov. 3, Pfizer raised its 2026 revenue guidance to $62.0-$64.0 billion, from $60.5-$62.5 billion, and named Cecile Guegan its permanent CFO.
Over the twelve months to June 28, 2026, Pfizer’s dividend used a thin 89% of its free cash flow. That’s an improvement on fiscal 2025, when dividends ate 108% of free cash flow, and on fiscal 2023, when they ate 193%. Free cash flow fell from $26.0 billion in fiscal 2022 to $4.79 billion in fiscal 2023, and it has run near or below the dividend since:
Pfizer’s stated priority is to maintain the dividend and grow it over the long term. So far, it’s delivering on the first half. The Oct. 6 payout was its 352nd consecutive quarterly dividend. And CEO Albert Bourla said on Pfizer’s second-quarter call in August that “even the most stretched scenarios that we are running, we will be able to maintain our dividend.”
Pfizer also faces patent losses on Ibrance, Xtandi and Eliquis outside the US, and two of its drugs get Medicare’s negotiated prices in 2027.
So which dividend wins?
Merck is the better dividend stock. What decides it for me is whether the dividend can keep growing from here, and Merck’s can. It pays out 66% of its free cash flow, pays more per share than it did in fiscal 2025, and grew sales 5% last quarter.
Pfizer has a strong case. $10,000 in Pfizer pays $570 a year today, compared with $230 in Merck. Even at Merck’s faster 5-year rate, Merck’s income wouldn’t pass Pfizer’s until about 2056. In year 10, Merck would pay about $380, a 3.8% yield on the original $10,000, against about $712 from Pfizer. Pfizer also carries less debt and trades at just 11x forward earnings, compared with 17x for Merck.
But Pfizer’s year-10 figure assumes 2.5% annual raises. Its dividend is where it was in fiscal 2025, and it already uses 89% of free cash flow. Merck’s growing check is the one I’d count on.
Of course, a real rebound in Pfizer’s free cash flow would change the math. Its 2027 outlook, with the Medicare prices built in, will show whether one is coming.
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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!
