Healthcare Sector Ideas

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Novo Nordisk - >>> These 2 Dividend Stocks Are Bargain Buys


Motley Fool

By David Jagielski

Mar 16, 2022


https://www.fool.com/investing/2022/03/16/got-5000-these-3-dividend-stocks-are-bargain-buys/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


KEY POINTS

Novo Nordisk pays a safe dividend, and its business is coming off a strong year with sales up 14%.


1. Novo Nordisk

Danish healthcare company Novo Nordisk pays investors a dividend yield of around 1.6%. The stock's total return (which include dividend payments) over the past five years are 238% -- well above the S&P 500's return of 94%.

The company's focus on diabetes and obesity makes Novo Nordisk a relatively safe investment. According to a recent study, half of all adults in the U.S. by 2030 could be categorized as obese based on body mass index. One-quarter could fall under the criteria for severe obesity.

Novo Nordisk's obesity care and diabetes segment accounts for around 88% of its revenue and is the big driving force behind its results. This year, the business expects to grow between 6% and 10% at constant exchange rates (CER), mainly due to that segment of its business. In 2021, the company's net sales totaled 140.8 million Danish kroner, up 14% at CER. On that revenue, Novo generated an impressive profit margin of 34%.

The company's financials look solid, and with an important place in the healthcare industry, this looks like a safe investment to hold for years. Novo's payout ratio sits at just 45% right now. Although it may look a tad expensive, trading at a forward price-to-earnings ratio of more than 30, the stock could be a bargain given the long-term opportunities it possesses. According to analysts at Fortune Business Insights, the global diabetes drug market will be worth more than $78 billion by 2026, growing at a compound annual rate (CAGR) of 6.1% until then. Over time, Novo's earnings multiple will come down, and the stock could look a lot cheaper as it capitalizes on all that growth.

Between the dividend and long-term potential it possesses, Novo Nordisk can be an optimal place to invest $5,000 into today.

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