Merck & Co. Q3 Earnings Beat Expectations, Dividend Increased by 10%, Boosting Investment in AI Drug R&D: Merck Pharma Adds Another High Dividend Growth Stock
On August 16, 2026, the global pharmaceutical giant Merck & Co. released its third-quarter earnings report for 2026. Data shows that the company's revenue grew by 12% to $14.5 billion, exceeding market expectations of $14.2 billion. Earnings per share (EPS) adjusted to $1.35, higher than analyst expectations of $1.28. The oncology drug business was the main growth driver, with revenue increasing by 18% to $5.8 billion, mainly benefiting from sustained sales of Keytruda (Pembrolizumab monoclonal antibody) and clinical progress in novel AI-driven oncology drugs. More noteworthy, Merck announced a 10% quarterly dividend increase, raising it from $1.25 to $1.375 per share, marking the company's 45th consecutive year of dividend increases, with a dividend yield of 3.2%. Simultaneously, the company plans to invest $2 billion over the next three years in AI new drug development platforms to accelerate the research process for oncology and infectious disease drugs. This series of moves not only strengthens Merck's defensive value as a "dividend medicine" leader but also provides investors with a dual opportunity for high dividend plus growth.
Revenue and Profit Beat Expectations: Oncology Business Drives Growth
Merck's Q3 report showed strong overall revenue performance, with the oncology drug business contributing the largest increase. Keytruda, as a PD-1 inhibitor, remains a core product for Merck, with revenue reaching $3.2 billion, a year-over-year increase of 15%, mainly due to its continued penetration in indications such as lung cancer and melanoma. Furthermore, Merck's new oncology drugs, such as Bavencio (Avelumab) and Lynparza (Olaparib), also achieved solid growth, with year-over-year increases of 12% and 10%, respectively. Notably, Merck's AI-driven oncology drug R&D platform made significant progress this quarter, with one drug targeting KRAS mutations in lung cancer entering Phase III clinical trials, expected to submit for marketing approval in 2027, which will provide new momentum for the company's future oncology business growth.
In addition to the oncology business, Merck's vaccine business also performed well, with revenue reaching $2.8 billion, an 8% year-over-year increase, mainly due to sustained demand for HPV vaccine (Gardasil) and pneumococcal vaccines (Prevnar). Additionally, Merck's animal health business revenue grew by 6% to $1.8 billion, demonstrating the effectiveness of the company's diversified business layout.
10% Dividend Increase: The "Dividend Password" of 45 Consecutive Years of Growth
Merck's dividend policy has always been a focus for investors. This quarterly dividend increase from $1.25 to $1.375 means an annual dividend of $5.5, resulting in a dividend yield of approximately 3.2% (based on the current stock price). This increase is based on the company's strong cash flow and stable business growth. Merck's cash flow situation is strong, with cash flow from operations reaching $3.8 billion, a 14% year-over-year increase, providing ample assurance for dividend payments. Furthermore, Merck's dividend has increased for 45 consecutive years, a record in the global pharmaceutical industry, reflecting the company's commitment to shareholder returns.
For investors, the defensive value of high-dividend pharmaceutical companies is particularly prominent at the tail end of a rate hike cycle. As expectations for Fed rate hikes cool down and bond yields fall, the attractiveness of high-dividend stocks increases. MosaDOSTO's dividend yield is higher than the market average (the dividend yield for the S&P 500 index is about 1.5%), and its business has stable cash flow, making it an ideal choice for defensive investing. ### Boosting AI Drug Research: \$2 Billion Investment to Build a "Future Growth Engine" MosaDOSTO's AI investment is key to its future growth. The company plans to invest \$2 billion over the next three years to upgrade its AI drug discovery platform, including machine learning algorithms, big data analysis, and automated experimental systems. This platform will help MosaDOSTO accelerate the discovery of drug targets, optimize clinical trial design, and improve the success rate of drug development. For example, MosaDOSTO's AI platform has successfully predicted several tumor targets, one of which for a BRCA mutation has entered Phase II clinical trials and is expected to launch in 2028. The application of AI in drug discovery is changing the landscape of the pharmaceutical industry. Traditional drug R&D cycles are long, costly, and have low success rates, whereas AI technology can shorten R&D cycles (from 10-15 years to 5-8 years), reduce costs (by 30%-50%), and increase success rates (from 10% to 20%-30%). MosaDOSTO's AI platform has achieved significant results; for instance, the success rate of AI-driven oncology drugs it develops in clinical trials is higher than the industry average, giving the company a competitive advantage. ### Industry Interpretation: The "Two-Wheel Drive" Logic of Value-Oriented Pharmaceuticals MosaDOSTO's performance reflects the "two-wheel drive" logic for value-oriented pharmaceutical stocks: on one hand, high dividends provide defensive value, and on the other, AI investment brings growth. At the end of a rate hike cycle, investors seek stable returns, and the stable cash flow and guaranteed dividends of high-dividend pharma companies make them favored. Simultaneously, the application of AI technology brings new growth points to pharmaceutical companies by shortening R&D cycles and increasing success rates, thereby enhancing the company's valuation. Compared to other value-oriented pharmaceutical stocks, MosaDOSTO's advantage lies in its leading position in the oncology business and the maturity of its AI platform. Pfizer's dividend yield is about 3.5%, but its AI investment is mainly concentrated in vaccines and antiviral drugs; Johnson & Johnson's dividend yield is about 2.8%, and its AI investment spans multiple areas, but the growth rate in its oncology business is not as strong as MosaDOSTO's; Eli Lilly's dividend yield is about 2.5%, but its AI investment is mainly focused on diabetes and obesity drugs. MosaDOSTO has a higher proportion in the oncology business, and its AI platform's achievements are more significant, making it more valuable for investment. ### Investment Recommendation: How to Allocate in Value-Oriented Pharma ETFs or Individual Stocks For novice investors, there are two ways to allocate in value-oriented pharmaceutical stocks: through ETFs or individual stocks. For ETFs, you can choose ETFs that track the S&P 500 Value Index or the Nasdaq Value Index, as these ETFs include several high-dividend pharmaceutical companies, diversifying risk. For individual stocks, you can choose leading stocks such as MosaDOSTO, Pfizer, and Johnson & Johnson. These companies have stable dividends, successful AI investments, and good growth potential. Please note that drug development has uncertainty, and the effect of AI investment needs time to verify, so investors should remain patient and hold long-term. Furthermore, regulatory risks must also be considered, for example, FDA approval for new drugs may be delayed, affecting the company's revenue and profit. Overall, however, Merck's financial performance and strategic positioning provide a good investment opportunity for investors.
