How Novartis and BMY’s Dividend Profiles Stack Up

Dividend guidance

In fiscal 2018, Novartis (NVS) and Bristol-Myers Squibb (BMY) reported an annual dividend per share of $2.85 and $1.60, respectively. According to Novartis’s fourth-quarter earnings investor presentation, the company reported free cash flow of $11.7 billion in fiscal 2018, a YoY rise of 12%. This was mainly driven by the company’s robust operating performance despite a slight drag associated with higher intangible investments.

How Novartis and BMY’s Dividend Profiles Stack Up

According to Novartis’s fourth-quarter earnings conference call, the robust cash flow position has enabled the company to return significant value to shareholders as dividends. In its fourth-quarter earnings investor presentation, Novartis proposed a dividend per share of 2.85 Swiss francs (or $2.89) for fiscal 2018, which implied a compound average growth rate of 8.2% and 10.2%, respectively, from 1996 to 2018. This is the 22nd consecutive dividend rise for the company and was approved by shareholders. The dividend is payable on March 6, 2019.

On December 6, 2018, Bristol-Myers Squibb (BMY) issued a press release announcing a hike of 2.5% in the quarterly dividend to 41 cents per share for the first quarter of fiscal 2019. According to the press release, the company’s directors anticipate an annual dividend of $1.64 per share for the company in fiscal 2019.

Wall Street projections

Wall Street analysts have projected Novartis’s annual dividend per share to be $2.97, $3.10, and $3.19, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively. These projections imply a YoY change of 4.29%, 4.14%, and 3.02% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

On the other hand, Wall Street analysts have projected Bristol-Myers Squibb’s annual dividend per share to be $1.64, $1.68, and $1.71, for fiscal 2019, fiscal 2020, and fiscal 2021, respectively, which implies a YoY change of 2.50%, 2.67%, and 1.78% for fiscal 2019, fiscal 2020, and fiscal 2021, respectively.

In addition to a higher absolute dividend per share, Novartis is also expected to grow its dividend per share at a faster rate as compared to Bristol-Myers Squibb from fiscal 2019 to fiscal 2021. Thus, Novartis may prove to be a better pick for the income investor.

Next, we’ll discuss the tax rate and interest expenses of Novartis and Bristol-Myers Squibb for fiscal 2019.