Novo Nordisk Offers Steady Gains To Go With Dividend


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Denmark'sNovo Nordisk ( NVO ), the world's top producer of diabetes drugs, has offered steady capital gains and a dividend too.

The stock has quadrupled from its low in April 2009 and is currently in the sixth week of a cup-type base. The pattern is second stage, which gives it a better chance of success than a later-stage pattern.

Novo has recovered from a 9% drop Nov. 6, when the Food and Drug Administration warned of possible heart problems with its new long-acting insulin drug degludec, also known as Tresiba. But an FDA advisory panel later recommended that degludec be approved, boosting the stock back up to its 50-day line.

More than 70% of Novo Nordisk's revenue comes from drugs to treat diabetes, which afflicted 366 million people worldwide last year.

Novo was ranked No. 23 in Wednesday's IBD 50. Its annualized dividend of $1.83 per share is good for a yield of 1.1%. That's lower than the 2.1% average dividend yield for the S&P 500. However, Novo's stock is up almost 40% this year, well ahead of S&P's 12% gain. Novo boasts a best-possible 99 Composite Rating, tops in the 40-member Medical-Ethical Drugs industry group.

Profits have picked up for two straight quarters, rising from 11% in Q1 to 18% and 34% in Q2 and Q3, respectively. Sales have also accelerated, from 6% to 7% and 15%.

Meanwhile, institutional investors have increased their holdings of Novo's shares for four straight quarters. The stock's B- Accumulation-Distribution Rating and 1.3 up-down volume ratio confirm that demand for the shares is still growing.

Yet Novo is struggling somewhat after clearing resistance at its 50-day line. Volume has been light as it forms the right side of its base.

On Wednesday, Moody's upgraded Novo's long-term corporate credit rating to A1 from A2. The upgrade "primarily reflects that Novo Nordisk has strengthened its financial profile over recent years, while also maintaining its leadership position in the diabetes care market," it said, adding that Tresiba will likely help Novo to "further protect and develop its insulin franchise."

Tresiba has been approved in Japan. U.S. and European approvals are pending.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance , Investing Ideas

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