Yahoo Finance

If you are interested in cashing in on Novo Nordisk A/S’s (CPH:NOVO B) upcoming dividend of ø5.15 per share, you only have 4 days left to buy the shares before its ex-dividend date, 22 March 2019, in time for dividends payable on the 26 March 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Novo Nordisk’s latest financial data to analyse its dividend characteristics.

Check out our latest analysis for Novo Nordisk

5 questions I ask before picking a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

• Is it paying an annual yield above 75% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

How does Novo Nordisk fare?

Novo Nordisk has a trailing twelve-month payout ratio of 51%, which means that the dividend is covered by earnings. Going forward, analysts expect NOVO B’s payout to remain around the same level at 50% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.8%. In addition to this, EPS should increase to DKK16.53.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although NOVO B’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.

Relative to peers, Novo Nordisk generates a yield of 2.4%, which is on the low-side for Pharmaceuticals stocks.

Next Steps:

Considering the dividend attributes we analyzed above, Novo Nordisk is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three pertinent factors you should further research:

1. Future Outlook: What are well-informed industry analysts predicting for NOVO B’s future growth? Take a look at our free research report of analyst consensus for NOVO B’s outlook.

2. Valuation: What is NOVO B worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether NOVO B is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.