Is Novo Nordisk's Dividend Safe?

Novo Nordisk  (NYSE: NVO  )  is one of the globe's biggest drug companies. It's a major player in providing diabetes treatments and is often included in dividend portfolios.

However, patent expirations and new drugs from competitors such as Eli Lilly (NYSE: LLY  )  are pressuring Novo to spend more on its research pipeline. As a result, dividend investors are right to question whether the risk of sliding sales threatens Novo's dividend payout.

In the following slideshow you'll see whether I think Novo's dividend is safe and gain insight into how the company's dividend yield matches up with industry peers Eli Lilly and AstraZeneca (NYSE: AZN  ) . 

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  • Report this Comment On June 19, 2014, at 3:45 AM, erich69 wrote:

    As a medical practitioner who treats diabetics I will tell you that Prandin is not a significant player in what is prescribed to patients so its patent expiration isn't critical. Levemir is the best long acting insulin available on the market, far superior to Sanofi's Lantus, and Eli Lilly's intermediate acting Humulin is comparable to Novo's Novolin. Eli Lilly's fast acting Humalog is also comparable to Novo's Novolog. Eli Lilly has been winning in the US due to price bidding leaving Novo more dependent on worldwide non-US sales. Novo's Victoza is a great drug but faces pressure as competitiors like Eli Lilly wait for approval for their products. As for as treatment goes for non insulin dependent diabetics, generics remain the bulk of what is prescribed with the remainder name brand drugs being made by variety of pharmaceutical companies.

  • Report this Comment On June 19, 2014, at 1:23 PM, Imcynical wrote:

    The nice thing about this discussion is that there really isn't any heavy lifting necessary to find the answer. NVO has been buying back 1.5-2.5% of it's outstanding stock for the last few years. Since there is plenty of money to cover the current dividend, should they decide to taper buybacks going forward, there would be more than enough money to double the current dividend if desired. I'll take the buybacks thanks.

  • Report this Comment On June 20, 2014, at 6:43 AM, FNN31 wrote:

    The dividend payout as a percentage of FCF is 47%; the remaining FCF was used for share buybacks. In the year end conference call, the CFO noted that they brought the payout up to this level (47% of FCF) to be in line with the industry.

    Guidance for 2014 FCF is 'around' 25 Billion Danish Kroner compared with 22.358 Billion in 2013.

    With a 47% expected FCF payout, FCF increasing by around 10%, and a significant share reduction from the buybacks I would speculate that this dividend is safe.

    What will the dividend be in 2020 or 2025?? I think this is an intriguing question.

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Related Tickers

10/23/2014 4:00 PM
AZN $69.35 Up +0.57 +0.83%
AstraZeneca plc (A… CAPS Rating: ****
LLY $64.35 Down -0.33 -0.51%
Eli Lilly & Co. CAPS Rating: ****
NVO $45.72 Up +0.38 +0.84%
Novo Nordisk CAPS Rating: *****

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