Pfizer (PFE 0.23%) reported third-quarter earnings this week that were generally underwhelming. The drugmaker announced that its sales sagged 2.2% to $12.36 billion and its adjusted EPS fell similarly by 2% year over year in the quarter. Pfizer's performance does little to encourage dividend investors that the company will return to profit growth next year, so let's consider three other dividend-paying drugmakers that may be better positioned next year to boost their dividend payout.

Source: Novartis

Reinventing itself for growth
While Pfizer's top and bottom line are struggling, Novartis' (NVS 2.27%) sales and earnings are growing. Novartis reported that growing revenue from top-selling treatments including Gleevac, Lucentis, and Gilenya resulted in total sales climbing 4% year over year to $14.7 billion in the third quarter, leading to EPS growth of 10% to $1.37. Thanks to cost-savings initiatives and rising sales for growth products, Novartis' operating income growth is outpacing sales growth, providing tailwinds heading into 2015. Novartis' SG&A as a percentage of sales, for example, declined by 1.9% year over year in the quarter.

Novartis announced earlier this year a slate of business changes, including the divestiture of its non-flu vaccines, the acquisition of GlaxoSmithKline's oncology product line, the creation of a new consumer-goods joint venture, and the sale of its animal health business. Those moves should focus Novartis' on higher-growth markets going forward. Novartis also enjoys ongoing sales strength for its ophthalmology business, Alcon, and its generic/biosimilars business, Sandoz. Those two businesses posted third-quarter sales growth of 5% and 6% in the third quarter, respectively.

However, it's not all smooth sailing at Novartis. The company's pharma unit will still need to overcome newly launched generic competition for its multibillion-dollar blockbuster Diovan; however, with a strong history of dividend increases and a competitive dividend yield of 3%, dividend investors may find it a better bet than Pfizer, especially given that Novartis' EPS is expected to grow from $5.14 this year to $5.73 next year while Pfizer's EPS is expected to remain unchanged.


Source: Novartis

Plenty of dividend-friendly upside
Amgen's (AMGN 0.60%) 1.7% forward dividend yield may appear uninspiring versus Pfizer's 3.6% yield, but investors may find that Amgen is far better positioned to grow its payout than Pfizer is. That's because Amgen's 33% payout rate is well below Pfizer's 62% rate. Additionally, while Pfizer's top and bottom line are struggling, Amgen's results are accelerating.

Amgen's sales grew 6% in the past year to $5.03 billion last quarter, leading to EPS of $2.30, up 19% from a year ago. Sales growth is being led by Prolia, Xgeva, Vectibex, and Kyprolis. Combined, those four drugs posted sales of $805 million last quarter, up 47% from a year ago.

Importantly, Amgen is getting increasingly more profitable thanks to a major restructuring that includes cutting its workforce by 20%. As a result, Amgen's SG&A fell 16% and its operating margin jumped 6.9% year over year in the quarter. Overall, Amgen is guiding investors to expect sales of $19.8 billion to $20 billion and EPS of between $8.45 and $8.55 this year. But it's Amgen's 2015 guidance that's particularly noteworthy. The company expects to realize even greater benefits from its restructuring next year and is forecasting sales of $20.8 billion-$21.3 billion and EPS of between $9.05 and $9.40. Since Amgen has more than $28 billion in cash on the books and a low payout ratio, there appear to be plenty of tailwinds for dividend increases going forward.

Source: Novo Nordisk.

Riding a big global wave
Diabetes powerhouse Novo Nordisk's (NVO 2.70%) biggest benefit may be its market-leading position in one of the world's fastest-growing indications. The company's market share in diabetes is nearly 30%, and given that the number of people with diabetes may soar to as many as 552 million by 2030, up from 366 million in 2011,Novo may be perfectly positioned to increase its dividend for years to come.

Rising demand for its diabetes product line is already helping boost sales. While the company hasn't yet reported its third-quarter results, second-quarter sales grew 6.3% and EPS grew 9.5% year over year.

To make sure that growth continues, the company is investing heavily in diabetes treatment R&D, including an aggressive $3.7 billion program that the company hopes will someday result in the first tablet form of insulin.

With Novo's insulin sales growing 12% and its operating margin improving 90 basis points to 39.9% in the first half of this year, the company appears to have plenty of sales and earnings momentum. For the full year, Novo expects sales and earnings to increase 7%, to 10% and 10%, respectively. If the company can continue to deliver that kind of performance, then a combination of share-price appreciation and dividend increases should more than make up for the fact that its 1.3% forward yield trails Pfizer.

Pfizer has a slate of challenges it's navigating, including the loss of Lipitor exclusivity in 2011, the loss of Viagra exclusivity in Europe last year, and the patent expiration of Celebrex this year. There's no question that Pfizer's balance sheet is solid. Its $33 billion in cash and short-term investments provides plenty of firepower, even after considering its planned $11 billion share-repurchase program. Having said that, future revenue and profit growth is critical to the long-term dividend growth, and since these other three companies are expected to see earnings grow, rather than shrink, in the coming year, they may prove to be better buys.