1 Magnificent Dividend Stock to Buy and Hold

There are plenty of dividend stocks on the market. However, some raise their payouts irregularly, while others don’t have businesses that look robust enough to support payout growth for a long time. Ideally, income-seeking investors want to avoid these situations. They prefer dividend-paying companies that can afford to raise their payouts regularly and aren’t at risk of reducing or suspending their dividend programs.

Let’s look at one stock that can give income-seekers precisely what they want: Swiss pharma giant Novartis (NVS 0.16%).

The underlying business is strong

Novartis is one of the largest drugmakers in the world, with a deep lineup of medicines, many of which make over $1 billion per year. Of the 13 blockbusters it had in its portfolio last year, 10 grew their sales year over year.

Novartis’ top-selling product remains Entresto, a medicine for heart failure. Entresto’s revenue increased by 30% year over year to about $6 billion. Meanwhile, Novartis’ Pluvicto, a prostate cancer medicine first approved in the U.S. in 2022, is flying high. It ended the year with sales of $980 million, an increase of 262% year over year.

Though several of Novartis’ products are seeing their sales drop due to competition, among other reasons, newer approvals like Pluvicto should pick up the slack. Novartis’ net sales for 2023 increased by a healthy 8% year over year to $45.4 billion. The company’s earnings per share came in at $6.47, 18% higher than the year-ago period. Novartis completed an important move last year. The company shed its generic and biosimilar division, Sandoz, into a stand-alone unit.

Novartis plans to focus on its core business of developing innovative medicines from here on out. On that front, the company continues to excel. In December, it earned approval for Fabhalta, a brand-new medicine for the treatment of a rare and potentially fatal blood disorder called paroxysmal nocturnal hemoglobinuria (PNH). As the first oral treatment for PNH, Fabhalta could go on to generate as much as $3.6 billion in annual sales, according to some analysts.

Novartis’ core business should generate even stronger growth this year thanks to this new medicine and several label expansions. The company’s pipeline remains strong, with more than 100 ongoing programs. Novartis will continue to add brand-new medicines to its already excellent lineup, leading to stronger financial results over the long run.

Novartis’ excellent dividend record

The most important thing for dividend investors to consider is the strength of a company’s operations. Of course, not every great business pays dividends, and those that do don’t always have particularly impressive track records. Fortunately, that’s not true of Novartis. The drugmaker has an impeccable dividend history. It has raised its payouts for 27 consecutive years.

There is no reason to think the company will stop this streak anytime soon, with revenue, earnings, and cash flows moving in the right direction. Last year, Novartis’ free cash flow jumped by 9% year over year to $13.2 billion. Novartis’ yield of 3.94% is much higher than the average for the S&P 500, which currently tops 1.47%. The drugmaker’s cash payout ratio more than covers its dividend program at just under 62%.

Given the strength of Novartis’ business and its dividend profile, the risk of decreased or discontinued payouts seems low with this stock. Novartis is an excellent pick for low-risk, long-term investors looking for a solid, passive income program.

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