Novo Nordisk has been a reliable player when it comes to dividends for the last 30 years. However, it is since 2022 that the massive increases have occurred and in the last 3 years alone the dividend has basically doubled. Much of this is about drugs for obesity (obesity care) where a completely new market has opened up in recent years.
The last time the company raised its dividend was in February 2025, when it raised the dividend to 11.4 Danish kroner per share, an increase of 21% from the previous level.
At the moment you can get Novo Nordisk at a yield of 2.33% . Of course, this is not an unbeatable percentage, but the average over the past 5 years has been 1.41%. Rarely have you gotten Novo at this yield.
When a stock like Novo, valued at over P/E 40, loses momentum, the price drop is large. Today, the P/E has fallen to 16.1 forward-looking. The average for the last 5 years has been 30.4. This is a better scenario than if the dividend yield were to increase sharply but the forward-looking price tag remains almost the same.
For those who are worried about possible dividend cuts, Novo Nordisk continues to distribute about 50% of its profits and if the dividend is not increased, the dividend ratio will be reduced to 39%.
It is likely that the dividend will be increased and the dividend ratio will continue to be 50% based on earnings/share.
Novo continues to perform well and earnings per share are increasing, but the prospects for the increase to continue at the same pace are not nearly as clear.
That’s why Novo Nordisk is so concerned
Recently, Dagens Industri wrote an article explaining how the pharmaceutical giant’s profits could double within a few years. However, the path and outlook for that is murky and a lot can happen between now and then. I have read the article (which is locked to subscribers) and still think that the reasoning behind it is well-founded.
The gist of the article was: even if Novo is forced to lower drug prices slightly in both the US and the rest of the world, it can still achieve a doubled profit by 2031 thanks to the continued increase in the number of patients in need.
Mr. Trump is a clear reason why the stock has continued to take a beating. Part of this is his desire for lower drug prices, which could put a damper on things in the short term.
A worse point, however, is the tariffs, where specifically targeted tariffs on pharmaceuticals could be decisive. Based on the company’s latest annual report, we could read how the USA, just as always, has been a major contributing market to sales. So far, Novo Nordisk has been quite silent towards investors regarding the tariffs.
The war for the best and most successful obesity drug continues. Here, just as before, Novo Nordisk and American Eli Lilly are competing to win market share.
Both have their own preparations for type 2 diabetes and obesity. Since November 8, 2023, when Eli Lilly’s obesity drug (Zepbound) was approved, it has been gaining market share at an incredibly fast pace. It is in late 2024 and the first half of 2025 that Eli Lilly really broke through, while the number of new prescriptions through Novo Nordisk has basically been stagnant.
Then there has been an external threat from other players who have manufactured their own and significantly cheaper preparations for obesity. That door was opened when the FDA previously stated that there was a shortage of this type of drug. Now at the end of May, this way in was blocked as there is no longer a shortage.
As I understand it has been very common for the population to buy these cheap variants, although there is probably a large undercount. An estimated one million Americans have taken this and in such cases there would be about the same number taking Novo’s Wegovy.
Here, both Novo Nordisk and Eli have a big advantage going forward if the easy door into the market continues to be kept closed.
Still pretty unclear
Weight loss pills are currently a hot topic, with both Wegovy (Novo Nodisk) and Zepbound being injected. So far, Eli seems to be winning the battle. What we do know is that Novo has at least submitted an application to get its pill approved.
Novo, however, does not seem satisfied with its version, as it is developing a completely new pill with the company Septerna that is more similar to what Eli Lilly has. This process could cost 2.2 billion dollars.
As I said earlier, Novo Nordisk is fundamentally doing well. It was a company that had performed well even before the obesity industry but then exploded upwards. Of course, the fall will be great if profits cannot continue to grow as strongly as previously thought.
A lot can happen around Trump and his tariffs and the drugs that are currently in the pipeline. In the longer term, I agree that profits will rise quite significantly as both diabetes and obesity are booming areas.
*Just a note, to remember to always have to do your own analysis.
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