Denmark’s Novo-Nordisk has been on every list of European Dividend Aristocrats for years. DA’s are companies that have managed to increase their dividend payouts for a decade or more, with few or no instances of decreasing said payouts in the mean time.
If you bought a DA early enough, and past performance continued, then what started out with a 3% yield has often enough morphed into a reliable, juicy 15% yield, if you waited long enough.
You’ll have noticed my use of the words “if”, and “and”. Those words are supposed to imply that history is bunk, and that relying on corporations to somehow increase their profitability forever is magical thinking.
Which is why I didn’t buy NVO around 2002, when it was first brought to my attention. Why buy a stock with a measly yield of 0.97%, just hoping for payout to double in a few years, merely because it has been doing so for the past two decades?
Well, that was stupid, because this company been increasing its dividend ever since (save a short-term shocker in 2019). Payout in 2002: 3 cents. Payout in 2023: $1.59. That’s an increase of 5,200%.
In other words, if I had bought NVO for $10k in 2002, my dividend would have been $97 per year, but that would have increased to around $5,000 by now, earning me a 50% yield on investment… per year.
During the same time, NVO’s stock price increased around by 7,400%. Don’t force me to calculate what an investment of $10k would have turned into by now.
Now, during these two decades of procrastination, I was hoping for some special news, something that gave reason to believe the music wasn’t going to stop. Sure, Novo-Nordisk was and is the number one diabetes-treatment company. We in the West no longer have the monopoly for being fat and lazy; hundreds of millions of folks in India and China have in the last decades discovered the joys of overeating industrial food, and spending hours a week in automotive traffic.
But would that be enough for the party to continue? Looking back, it obviously did. Given the choice of curing your Diabetes Type 2 with a strict fast, or taking a pill… here, East and West shall very well meet.
But now, there is an additional, quite OK reason to hope that NVO has a good-looking future. As I recently read in German media, their recently introduced weight-loss treatment Wegovy is the must-have cure for wealthy folks like Elon Musk who are getting a little heavy. As it appears, it is approximately as effective as weight-loss surgery, making the $1k one pays for the treatment every two weeks seem like a bargain. And, over the past few months, shortages have reportedly occurred, indicating Wegovy is the current drug of choice. This, before sales in Europe have even begun!
Back to the general discussion of Dividend Aristocrats, there is some evidence that companies that concentrate on the long-term benefits for their shareholders tend to be managed better. NVO in particular is in a good position to take a long view, as it has a good shares structure, with one shareholder holding 25% of its shares and 45% of its voting rights: enough to enable stability, but not so much as to kill dynamism.
The research says Dividend Aristocrats generally offer higher risk-adjusted returns and downside protection than the broad-based benchmark. To be honest, I am still sceptical about the long-term prospects of many DA names, such as Coca-Cola: do we really expect so many more people to drink sugary water in ten years time, just because the best and brightest marketing folks work at KO? I like the Novo-Nordisk story much better, so I’m a buyer.
NVO has gained almost 19% since I posted this. You're welcome.
NVO is close to 52 week high in US. Any Dividend Etf or fund in US with high percentage of NVO? Thanks for your articles.