Novo Nordisk Stock – Danish Dividend Power – Columns

The Novo Nordisk share is a basic investment for many long-term oriented shareholders. Within the last 10 years, dividends and price gains have added up to an impressive return of over 280 percent, which corresponds to an average annual return of 14.5 percent. In particular, Novo Nordisk’s strong position in the diabetes market almost makes it look like a safe bet. The high demand for the share has pushed the price close to the all-time high of 452 DKK.

In this analysis, we check whether you can expect further price gains and dividend increases with the Novo Nordisk share.

The business model: This is how Novo Nordisk makes money

Novo Nordisk share
logo Novo Nordisk logo
country Denmark
Branch Pharma
Isin DK0060534915
Market capitalization € 133.0 billion
Dividend yield 2.0%
Stability dividend 0.94 of max. 1.0
Stability gain 0.96 of max. 1.0

Novo Nordisk has grown into a leading producer and marketer in the treatment of diabetes since its inception in 1923. Novo Nordisk is now active in other pharmaceutical segments. In addition to diabetes as the main sales driver, other conditions such as haemophilia (blood disease), obesity and stunted growth are treated. In addition, Novo Nordisk has a small biopharma segment, which, with a share of 1 percent of total sales, is currently hardly relevant.

Novo Nordisk sales by area of ​​application, source: Annual report

Novo Nordisk sales by area of ​​application, source: Annual report 2019


By far the largest division, Diabetes, generates 80 percent of total sales and makes Novo Nordisk the clear global market leader. In diabetes, the human carbohydrate metabolism is disturbed, with type 2 diabetes being the most common with 90 percent of all diabetes diseases. Novo Nordisk uses various drugs and devices to combat the symptoms of this disease. Devices such as the “insulin pens” aim to administer insulin to people with diabetes and thus enable them to lead a largely normal life with the disease. In addition, Novo Nordisk offers drugs that regulate the insulin balance or the insulin release. This mainly includes so-called GLP-1 analoguesthat stimulate the pancreas to secrete insulin.

Novo Nordisk's market share in diabetes

Novo Nordisk’s market share in diabetes, source: 3rd quarter report


Another pharmaceutical area is the blood clotting disease hemophilia. In this mostly hereditary disease, blood clotting is disturbed. People affected by the disease therefore bleed longer than people with intact blood clotting. The hemophilia division is responsible for 8 percent of total sales. Novo Nordisk develops and markets pharmaceutical preparations and operates the HaemCare platform, which provides information about living with haemophilia and how to treat it (with Novo Nordisk products).


A business area that came about by chance is tackling obesity. Novo Nordisk has found that its diabetes drug semaglutide has shown weight loss in many patients when taken. From this accidental discovery, a separate business area arose consisting of a portfolio of drugs against obesity. The drug Saxenda is now the best-selling anti-obesity drug and had a market share of 32 percent in 2019. The share of group sales is just 5 percent but still low.

Stunted growth

The Growth Disorders division is responsible for 6 percent of total sales. Novo Nordisk markets and develops products such as injection devices and corresponding hormone therapies, for example to treat growth disorders caused by other underlying diseases or a hormone deficiency.

Novo Nordisk in the starter depot

Novo Nordisk is one of 20 stocks in the starting portfolio. In the vote on which pharmaceutical shares we will include, Novo Nordisk had prevailed against Johnson & Johnson and Amgen. You can see the presentation of Novo Nordisk and the other two candidates in this video.

Future prospects and weaknesses of the business model

Novo Nordisk is benefiting from the growing prosperity in the world, which is a negative side effect of serious common diseases such as obesity and diabetes. People suffering from diabetes have a life expectancy that is eight years shorter and life expectancy by 150 percent increased risk of stroke. These common diseases are a pressing social problem and at the same time a mega-market for Novo Nordisk.

The fact that the sales associated with diabetes will continue to rise can be seen from several developments. The total number of people with diabetes 2 has been growing for decades without this trend becoming apparent. Most people with Diabetes-2 now live in Asia, especially in India and China, especially in countries with a particularly fast growing middle and upper class. In addition, the number of young people with diabetes 2 diseases is increasing, which also indicates continued growth momentum.

Forecast of diabetes diseases for the future

Forecast of diabetes diseases for the future

Novo Nordisk expects the number of patients to be treated to increase by 4 percent annually over the next five years. The management is not only assuming a growing market, but also believes that it will increase its own market share from the current 28 percent to 33 percent in the next five years. Novo Nordisk wants to achieve this with new and innovative forms of therapy such as oral preparations to control insulin release.

Novo Nordisk market shares and future prospects

Novo Nordisk market shares and future prospects, source: investor presentation

The opportunities lie above all in the markets outside of North America, where Novo Nordisk already generates over half percent of its sales. Especially the regions of Japan and Korea (5 percent of sales) and especially China (11 percent of sales) with the rapidly growing middle class offer great growth opportunities.

The five countries with the highest sales share for Novo Nordisk (Source: FactSet Workstation)

The five countries with the highest sales share for Novo Nordisk (Source: FactSet Workstation)

The fact that an increasing number of diabetes 2 diseases at Novo Nordisk inevitably leads to increasing profits is a fallacy, because Novo Nordisk’s business model has weaknesses. In what is currently the most important market, the USA, the company has to repeatedly price its own drugs with so-called Pharmacy Benefit Managers such as CVS Health negotiate, resulting in strong competition and price pressure from major competitors Sanofi and Eli Lilly. That Novo Nordisk is to be hit hard here was shown in 2016, when the share price plummeted by almost 40 percent due to strong price pressure. Closely related to competitive pressure is pressure to innovate, particularly caused by expiring patents. However, in the long term, Novo Nordisk has coped well with these challenges. All in all, thanks to past experience and strong market positions, the company has the best prerequisites for benefiting from the negative side effects of global growth in prosperity in the future as well.

Novo Nordisk accelerates growth

You can see from the period from 2016 to 2018 that not even market leadership in a growth market guarantees growth. During this period, Novo Nordisk’s sales stagnated at DKK 111 billion, largely due to price pressure in the US. Only last year did growth pick up again and, according to forecasts, will gain momentum again in the next few years. In 2023 sales are even expected to reach DKK 159 billion.

The sales development of Novo Nordisk in the share finder

The sales development of Novo Nordisk in the share finder

In the recent past, not even the coronavirus pandemic was able to harm the growth spurt, which underlines Novo Nordisk’s defensive business model. Sales rose in the first three quarters by 6 percent. That the modern GLP-1 products recorded strong growth of 29 percent and market shares of 3 percent were able to gain, illustrates the innovative ability of the Danish company. The management also raised the forecast for the current full year and now expects sales and profit growth of 5 to 8 percent.

That’s how profitable Novo Nordisk is

Novo Nordisk scores with increasing profits. Earnings per share are expected to rise from 16.38 DKK in 2019 to 18.04 DKK in 2020. The forecasts also envisage a further increase in profits for the next few years. Earnings per share are expected to rise to DKK 25 by 2023, an increase of almost 40 percent compared to the current level.

Novo Nordisk earnings and cash flows in the stock finder

Novo Nordisk earnings and cash flows in the stock finder

Novo Nordisk has also increased margins over the past 15 years. In particular, the net margin and operating margin recorded strong growth. Since 2014, however, the margins have remained at a high level, fluctuating slightly. Novo Nordisk is a good example to show that a company’s margins can’t go up forever. Future earnings growth depends primarily on increasing sales.

Novo Nordisk margins in the share finder

Novo Nordisk margins in the share finder

How safe is the Novo Nordisk dividend?

Novo Nordisk has increased its dividend by an average of 12 percent over the last 5 years. Dividend payments are made semi-annually in March and August and in 2020 were 5.35 DKK and 3.25 DKK respectively. At the current price of 426.2 DKK, this corresponds to a dividend yield of 2.02 percent, which is exactly the long-term average over the last 10 years.

The analysts expect Novo Nordisk to pay a dividend of 9.63 DKK per share to shareholders next year, an increase of almost 12 percent. Management would have enough leeway for such an increase. Because in 2020 the payout ratio was only 54 percent of free cash flow and 50 percent of profit. Thanks to the moderate payout ratio with reliably increasing sales and profits, the dividend seems safe to me.

The Danish withholding tax

Denmark levies a withholding tax of 27 percent on dividends. The Federal Republic of Germany recognizes 15 percent of this directly, so that the German withholding tax is reduced from 25 to 10 percent. The total tax burden would then be 27 percent plus 10 percent, i.e. 37 percent and thus 12 percent more than the German withholding tax of 25 percent. This 12 percent withholding tax is reimbursed by the Danish government upon request. In the past, this was very simply done digitally. Too easy for scams that cost the Danish state around USD 2 billion. For this reason, the refund procedure will be revised and no refund will be paid out until then.

Is the Novo Nordisk share fairly valued

In the wake of the resurgent growth since 2019, the share price has also risen, which has meant that the Novo Nordisk share now seems overvalued. Multiples such as an adjusted P / E ratio of over 20 and a KCV (price-cash flow ratio), together with the only average dividend yield, indicate a high share price. The rapid price increase in 2014 and the subsequent slump in the share in 2016 shows how easily the price reacts to negative news in the event of marked overvaluation.

Calculation of the fair value of Novo Nordisk shares in the share finder

Calculation of the fair value of Novo Nordisk shares in the share finder

The market has already priced in some of the expected profit and sales growth. However, there is still room for improvement, because if we look at the fair values ​​for 2023 in the dynamic equity valuation of the equity finder, then with a view to the expected adjusted profits arithmetically an upward potential of 26 percent, which includes an annual return of almost 8 percent Dividend equals.

The company’s solid balance sheet is likely to be partly responsible for the rise in Novo Nordisk’s share price. The debt ratio of over 57 percent does not sound impressive, but the debt including all liabilities of DKK 80 billion is offset by an annual repayment power of DKK 30 billion including a cash balance of over DKK 25.4 billion, which is the equivalent of over EUR 3.3 billion. Enough for one or two takeovers.

Total asset indebtedness and repayment power of Novo Nordisk in the stock finder

Total assets debt and repayment power of Novo Nordisk in the stock finder

Conclusion: Novo Nordisk shares still have room for improvement

There have been more favorable times in the past few years to put Novo Nordisk shares into custody or to increase the position. The most recent price rises are supported by rising profits, but they have rushed away from the valuation of the share. However, if the momentum of earnings growth continues or even accelerates, the share should reach its fair value in a few years and the price will continue to rise as a result. It is difficult to say whether you will have another opportunity for a cheaper entry by then. From my point of view, shareholders with a long-term investment horizon still have the opportunity to deposit Novo Nordisk shares at a very reasonable price, which is why I topped up again in November and expanded my position in Novo Nordisk.

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