The new European Aristocrat: Novartis

Just about Financial Independence and Retire Early

The new European Aristocrat: Novartis

Congratulations to Novartis that just became dividend aristocrat this month. With a payout of CHF 3 per share they increased their annual dividends every year for the past 25 years. That is increasing dividends since its foundation.

The company with headquarters in Basel, Switzerland, was founded in the 90’s from a merger of Ciba-Geigy and Sandoz. Having offices around the globe, it is also one of the biggest pharmaceutical companies in the world.

Its history actually starts in the 18th century with the trade of materials, chemicals and remedies in the Basel area by J. R. Geigy. About a century later, the foundation of Ciba happened. Ciba stands for Chemische Industie Basel, which started as a silk-dyeing factory and started to produce fuchsine. The two companies merged in 1970 to form one part of the Novartis merge. The other company that was included in the merger was founded as a chemical company Kern & Sandoz in Basel in 1886. It also started out with the production of dye, then with the artificial sweetener saccharin, and eventually with LSD.

The companies products range from medications for osteoporosis to Alzheimer to different variations of cancer. The next time you get something from the pharmacy, check if it is from Novartis.

There is also an other big pill roller based in Basel that is also a dividend aristocrat. Its name is Roche. The company holds about 33.3% of all the Novartis shares and vice versa. Both are heavyweights of the Swiss Market Index. The income of Novartis from Roche amounted to USD 677 million in 2020.

Data

Novartis is one of the biggest pharmaceutical companies by market capitalization, placing 2nd in 2019 right behind Johnson & Johnson. Net sales were USD 48.7 billion in 2020 with the key growth drivers being Entresto, Zolgensma and Cosentyx.

As previously mentioned, the dividend for the financial year 2020 is CHF 3, an increase of 1.7%. We also saw an increase in net income from US$ 7’147 million to US$ 8’071 million. On the contrary, the free cash flow decreased about 10% and amounted to US$ 11’691 million in the past year.

They claim that Covid19 negatively impacted certain areas (mainly ophthalmology and dermatology) due to lockdowns.

Let’s have a look at the chart.

Novartis chart since 96.

An investment of 10’000 of your favorite currency in Novartis in 96 would have resulted in 40’000 today. If additionally you would have re-invested the dividends into Novartis stocks, then your 10’000 would be worth 80’000 today, so close to a tenbagger.

The biggest increases in dividends were during the financial crisis with a streak of 18-25% three years in a row. This past increase was only 1.7%.

Stock Splits

There was just a single stock split on May 7th in 2001. On that day shareholders would get 40 stocks for each share in their position. The closing price on the prior trading day was 1194.41 Swiss Francs. The volume changed from 172’445 to 6’451’511.

Personally, I have a lot to do with the pharmaceutical industry, and find Novartis to be a worth an investment. It is part of my portfolio. Let me know in the comments below if you have Novartis in your portfolio.