This contradicts statements made by the US bank's chief executive, John Thain, last week - when he pledged to maintain the dividend at its current 35 per cent level.
"We believe we will shortly be back to profitability and be able to earn the dividend," he said in an interview.
"I prefer to get the yield lower by getting the stock price higher."
A cut would be the first administered since Merrill went public in 1971.
It would suggest that the bank is still struggling to build up its capital ratios, after being hit with $19 billion of credit crunch losses.
Merrill also launched a new stock offering of $9.8 billion last month, in a bid to shore up its ailing balance sheet.
Speaking to the news agency, Interactive Brokers options trader Steve Sosnick said: "The market is pricing in a significant cut, roughly 50 per cent or more."