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Big pharma giant
Merck (MRK - Get Report) takes the No. 3 spot on the Dow with a yield of 4.35%. Pharma stocks in general tend to have higher payouts right now, the result of Mr. Market's discounting for the massive black clouds of patent dropoffs overhead. With most major pharmaceutical stocks losing key drugs in the next couple of years, investors are understandably concerned. But Merck is has some defenses against the loss of blockbuster names like Singulair.
One of the biggest defensive moves was the acquisition of Schering-Plough in 2009, a purchase that dramatically expanded its late-stage pipeline and grew its consumer products exposure. While there are still some major unknowns in Merck's pipeline, it certainly beats not having a backup plan. This company generates significant cash right now -- as a result, it's got the wherewithal to handle some revenue bumps in the near-term.
At this point, patent risks are already priced into shares.
Merck shows up on a recent list of
10 Dividend Stocks Held by Highly Rated Fund Managers.