Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. 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.
Headquartered in Bagsvaerd, Novo Nordisk (NVO) is a Medical stock that has seen a price change of -19.59% so far this year. Currently paying a dividend of $0.82 per share, the company has a dividend yield of 2.37%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.39%, while the S&P 500's yield is 1.52%.
Looking at dividend growth, the company's current annualized dividend of $1.64 is up 59.8% from last year. Over the last 5 years, Novo Nordisk has increased its dividend 5 times on a year-over-year basis for an average annual increase of 22.48%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 48%, meaning it paid out 48% of its trailing 12-month EPS as dividend.
NVO is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2025 is $3.93 per share, which represents a year-over-year growth rate of 19.82%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. It's important to keep in mind that not all companies provide a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers its 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 is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
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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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