Novartis (VTX:NOVN)

Novartis was formed from the merger of Ciba-Geigy and Sandoz in 1996. The company, headquartered in Basel, is the 3rd largest pharmaceutical group in the world and the 2nd largest producer of generic drugs. Sandoz is known for having developed LSD in 1938, marketed as a psychiatric drug from 1947 to the early 1960s, under the name Delysid. Let's see if Novartis' dividends are also capable of making us hallucinate...

Novartis struck hard in 2011 by announcing the elimination of 2,000 jobs, including 1,100 in Switzerland, even though the multinational generated a net profit of 2.49 billion dollars, an increase of 7% compared to the same period the previous year. After intense negotiations between the unions, the State and the multinational, and in exchange for an increase in employees' working hours and a temporary tax reduction granted by the canton of Vaud, Novartis decided not to close its Prangins site.

Despite this somewhat chaotic vision from a social point of view, Novartis has many of the qualities we look for in a great dividend payer. In addition, the title is listed in CHF on the SMI, which makes it possible to reduce the natural overexposure to the dollar when investing in growing dividends.

However, the "youth" of the company and its dividend (16 consecutive years of increase) hardly holds up to comparison with the big names in my portfolio, such as Procter & Gamble Or Johnson & Johnson. Novartis is therefore the equivalent of an excellent hope of a football team, a youngster full of potential that must be kept close at hand and monitored. My algorithm sets him in "watch/hold", but well placed taking into account his relative youth. To date, I have therefore not taken a direct position on Novartis.

THE long term dividend yield is very good, at 4.24%. The company has increased its distributions in recent years at an interesting annual rate of 10,11%. The distribution rate stands at 44.51%, which leaves Novartis plenty of room to increase its dividend, even in the event of a difficult passage. Volatility is also very attractive, at only 9.08%.

SMI heavyweight, Novartis follows the evolution of the Swiss flagship index almost scrupulously. Or perhaps I should rather say that it is the latter which follows Novartis...

Novartis suffers from strong Swiss franc. When the dollar weakens, the stock tends to lose value. This can be a real problem since one of the interests of this title, listed in CHF, is precisely that it is supposed to offer diversification against currency risk, in particular that of the fall of the greenback. The $risk confirms this situation, with 0.42, indicating that the share price in CHF tends to follow the value of the USD/CHF pair. We can therefore understand why the company is looking for solutions to limit its costs in Switzerland, even if they are questionable from an ethical point of view...

Growing dividends imply a policy of sustainable commitment from the company. This sustainability is part of the intersections of its social and economic issues. With Novartis we realize that it is sometimes difficult to reconcile these two approaches, at least in the short term. In the long term, however, the company's finances must be solid to ensure jobs. Conversely, its human skills guarantee it a sustainable competitive advantage.