Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Novo Nordisk in Focus
Novo Nordisk (NVO) is headquartered in Bagsvaerd, and is in the Medical sector. The stock has seen a price change of -21.47% since the start of the year. The drugmaker is currently shelling out a dividend of $0.82 per share, with a dividend yield of 2.43%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.37% and the S&P 500's yield of 1.6%.
In terms of dividend growth, the company's current annualized dividend of $1.64 is up 59.8% from last year. Novo Nordisk has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 22.48%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Novo Nordisk's current payout ratio is 22%. This means it paid out 22% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, NVO expects solid earnings growth. The Zacks Consensus Estimate for 2025 is $3.89 per share, with earnings expected to increase 18.60% from the year ago period.
Bottom Line
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. With that in mind, NVO presents a compelling investment opportunity; it's not only an attractive dividend play, but the stock also boasts a strong Zacks Rank of #2 (Buy).
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Novo Nordisk A/S (NVO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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