Novartis AG's Dividend Analysis
Understanding the Dividend Outlook for Novartis AG
Novartis AG (NYSE:NVS) recently announced a dividend of $3.78 per share, payable on a date yet to be announced, with the ex-dividend date set for 2024-03-07. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Novartis AG's dividend performance and assess its sustainability.
What Does Novartis AG Do?
This Powerful Chart Made Peter Lynch 29% A Year For 13 Years
How to calculate the intrinsic value of a stock?
Novartis develops and manufactures innovative drugs. The firm's key areas of drug development include oncology, rare diseases, neuroscience, immunology, respiratory, cardio-metabolic, and established medicines. The company sells its products globally, with the United States representing close to one third of total revenue.
A Glimpse at Novartis AG's Dividend History
Novartis AG has maintained a consistent dividend payment record since 1992, with dividends currently distributed on a yearly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Novartis AG's Dividend Yield and Growth
As of today, Novartis AG currently has a 12-month trailing dividend yield of 3.41% and a 12-month forward dividend yield of 3.68%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Novartis AG's annual dividend growth rate was 3.80%. Extended to a five-year horizon, this rate decreased to 1.70% per year. And over the past decade, Novartis AG's annual dividends per share growth rate stands at 2.30%.
Based on Novartis AG's dividend yield and five-year growth rate, the 5-year yield on cost of Novartis AG stock as of today is approximately 3.71%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Novartis AG's dividend payout ratio is 0.84, which may suggest that the company's dividend may not be sustainable.
Novartis AG's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Novartis AG's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Novartis AG's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Novartis AG's earnings increased by approximately 4.60% per year on average, a rate that outperforms approximately 39.95% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -3.70%, which outperforms approximately 25.79% of global competitors, indicates some challenges in growth but does not overshadow its strong earnings performance.
Next Steps for Investors
Considering Novartis AG's dividend payments, dividend growth rate, payout ratio, profitability, and growth metrics, investors should weigh these factors in their decision-making process. While the payout ratio may raise concerns about dividend sustainability, the company's strong profitability and decent growth metrics provide a counterbalance. For those looking to expand their portfolio with high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener for more informed investment choices.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
