Does Novartis AG (NYSE:NVS) Have A Place In Your Portfolio?

Over the past 10 years Novartis AG (NYSE:NVS) has returned an average of 4.00% per year from dividend payouts. The company is currently worth US$191.86B, and now yields roughly 3.71%. Does Novartis tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Novartis

How I analyze a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?

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

• Has dividend per share amount increased over the past?

• Does earnings amply cover its dividend payments?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

NYSE:NVS Historical Dividend Yield Jun 15th 18

Does Novartis pass our checks?

Novartis has a trailing twelve-month payout ratio of 83.19%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 53.36%, leading to a dividend yield of around 4.13%. However, EPS should increase to $4.16, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. NVS has increased its DPS from $1.6 to $2.8 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes NVS a true dividend rockstar. Relative to peers, Novartis produces a yield of 3.71%, which is high for Pharmaceuticals stocks but still below the market’s top dividend payers.

Next Steps:

With this in mind, I definitely rank Novartis as a strong dividend stock, and makes it worth further research for anyone who likes steady income generation from their portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important factors you should look at:

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

2. Valuation: What is NVS 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 NVS 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.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.