This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Merck Won't Yield on Yield

When the diet-drug lawsuits started, "we didn't have a sense of how much it [the cost] would be," says Ken Martin, Wyeth's chief financial officer. The diet-drug litigation reserve has since climbed to $21.1 billion.

By the end of 1999, when Wyeth set aside the first reserve of $4.75 billion, Martin says executives "didn't feel comfortable" about the potential impact of lawsuits on the dividend and the company's ability to meet research, development and capital investment goals. "Each year, we had to reassess," he adds.

But Wyeth was aided by strong operating results and some good timing. The company, then known as American Home Products, got a $1.8 billion breakup fee when Pfizer (PFE - Get Report) outbid it for Warner-Lambert in 2000. Also that year, Wyeth sold its agricultural chemicals business to Germany's BASF (BF) for nearly $4 billion.

A year later, Wyeth benefited when Amgen (AMGN - Get Report) made a $16 billion bid for the biotechnology firm Immunex, in which Wyeth owned a 41% stake.

"If those [events] didn't happen, our view of paying the dividend would have been different," Martin says. "We did not sell any business to get cash to fund the diet drug litigation."

Even so, Wyeth stopped raising the dividend at the end of 1999. For the next six years, the quarterly payment was 23 cents. On Dec. 1, Wyeth paid 25 cents as a reward to shareholders, Martin says.

"The uncertainty level has declined," he explains. "Our management and board are saying that we are comfortable with our cash position, the diet drug litigation and the needs of our company."
4 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AMGN $158.30 0.00%
BMY $72.18 0.00%
MRK $54.84 0.00%
PFE $32.71 0.00%
SNY $41.10 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs