I think Mr. Jubak fails to look at the pipeline. Right now Merck has the most drugs in Phase 3 trials than anyone else. At least 3 of those drugs are billion dollar drugs and 2 should be approved before the end of the year. There are 3 others that could be billion dollar drugs. They have another 7 that are in phase 2 trials. This was the first negative article I have seen on Merck in mote than 3 months. Full disclosure, I am long on Merck. 

Just like a lot of large drug companies, they have major patent expirations in the coming years and or currently. The pipeline *might* be good, but in the near term I'd expect price pressure. Plus, there's not many signs they will ever be able to grow beyond single digits in profits annually in the long term.

Wait a minute, what?  Price appreciation doesn't affect your dividend yield.

Yes it does.

Yield is calculated by current share price.

If you mean you're going to get the same payout because the nominal payout amount is already set, then yeah. But that's not the yield. Yield (at least the common one everyone uses) is latest full year dividend amount divided by the current share price.

His analysis is more about whether or not Merk will keep increasing it's dividend in the event of capital appreciation. Something you look for if you are targeting dividend payers.

MCD for instance, has had great capital appreciation, but all the more delight, they have also increased their dividend over these years, keeping the yield stable.

In addition to worrying about keeping an attractive yield, if the yield falls, that can have a negative impact on companies like this that attract investors because of the yield. No one is piling into Merck on the basis of capital appreciation (at least, they shouldn't be).

Long term, dividends are what produce gains. Over 100+ years, dividends are responsible for more than 2X gains as compared to price appreciation.