Better Pharma Dividend Stock: Novartis vs. Merck

The pharmaceutical industry is a good place to look for solid dividend stocks. Since they offer lifesaving therapies, drugmakers generally see consistent demand for their products, even amid severe economic challenges. That allows them to generate consistent financial results and grow their dividends even during tough times. However, not all pharma dividend stocks are equally worth investing in. Consider Merck (NYSE: MRK) and Novartis (NYSE: NVS), two of the largest in the game. They have a lot in common: deep product lineups, strong pipelines, and both have beaten the S&P 500 over the past 12 months (as of writing). But which one of these is the better dividend stock? Let's find out.

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The case for Merck

Merck has faced some challenges in recent years, as its HPV vaccines, Gardasil and Gardasil 9, have seen declining sales due to issues in Asia. Further, Merck may face increased competition in the oncology market, where it is a leader thanks to Keytruda, a medicine approved across many cancers. Despite the obstacles, there are good reasons to stick with Merck. Here's one: Keytruda remains the world's best-selling cancer drug.

It will lose patent exclusivity within the next two years, but Merck has earned approval for a new, subcutaneous version of the medicine that is faster and easier to administer, with similar efficacy across many of the original's indications. Many old and new patients will opt for the new Keytruda.

Beyond its oncology franchise, Merck has developed -- or is still working on -- newer drugs that should also drive sales growth over the next five years. It earned approval for Winrevair two years ago. This medicine for pulmonary arterial hypertension exceeded $1 billion in annual sales in 2025, and it should maintain its momentum. The company's new pneumonia vaccine, Capvaxive, is also posting strong sales growth.

Turning to Merck's pipeline, one of the company's most promising programs is CD388, an investigational long-acting antiviral that could revolutionize the influenza vaccine market. Merck has plenty of other attractive pipeline candidates. Lastly, the company has a strong dividend program, with a forward yield of 2.9%, and it has increased its dividends by 93.8% over the past decade.

Merck is a great pick for long-term income seekers.

The case for Novartis

Last year, Novartis lost patent exclusivity in the U.S. for its best-selling drug, Entresto, which treats chronic heart failure. The company's revenue moved in the right direction in 2025 despite this headwind, and the drugmaker projects that it will, once again, post decent sales growth in 2026. One of Novartis' strengths is its deep product lineup. Last year, 15 of its medicines generated over $1 billion in annual sales, with most posting year-over-year revenue growth.

Novartis also has a strong pipeline and has launched exciting products in recent years. They include Fabhalta, a medicine for a rare blood disease called paroxysmal nocturnal hemoglobinuria. Fabhalta's sales are soaring, and the medicine should join the ranks of billion-dollar drugs within a couple of years, as will a few of Novartis' other medicines that will help replace Entresto.

The drugmaker's ability to navigate this patent cliff while still maintaining decent sales growth says a lot about the business. Then there is Novartis' dividend program. The company's forward yield is 3.1%. Novartis has raised its payouts by 84.2% over the past decade and has done so every year since 1996, an impressive streak that tells us that Novartis' dividend is very safe.

The verdict

Both companies are great picks for dividend seekers, but I'd give a slight edge to Novartis right now. Here's why. First, Novartis is far more diversified than Merck. Whereas the latter will almost certainly see sales decline -- at least for a little bit -- when Keytruda loses patent protection, Novartis is managing the loss of patent exclusivity for its best-selling product surprisingly well. That's partly because it is far less dependent on Entresto than Merck is on Keytruda. Second, although both companies generate somewhat similar revenue and earnings (with an advantage to Merck in these departments), Novartis' shares look cheaper right now.

NVS Revenue (Annual) data by YCharts

Third, Novartis has a higher yield and better long-term dividend track record than Merck. For those reasons, Novartis is the better option for pharma-focused income-oriented investors right now.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck. The Motley Fool has a disclosure policy.