Last Updated on April 26, 2022 by Rational thinking
The Danish stock market is pretty fragmented and is not dominated by just a few sectors, like for example the Norwegian stock market. Denmark has a few solid dividend payers, Novo-Nordisk and Carlsberg probably being the best knowns. However, the list below, which is a work in progress, has other interesting names. As we read and understand more businesses, more companies are added. The companies mentioned in the article are only meant for ideas for you to investigate further. We are not considering valuation multiples.
The stocks below are mainly taken from the mid-to large-cap segment. Why is that? Our research indicates the bigger companies are more likely to keep a steady dividend. One reason is financial muscles, and the other is greater protection via regulation and globalization. Red tape and regulation are friends of big business.
About half of the listed companies in Denmark have paid a dividend during the last three years.
Danish dividend frequency:
Most Nordic firms most companies pay the dividend once a year, usually after the annual shareholder meeting in late winter/spring.
Danish withholding taxes:
Denmark has a withholding tax of 27%. Withholding taxes are never included when the total returns are calculated, so you must keep this in mind. The withholding tax is withheld by the broker and sent to the local IRS. If you are a resident of a country with a tax treaty with Denmark, you might get a lower rate of 15%. Even better is to get the tax paid back, but that normally requires some paperwork from your side.
Why dividend investing?
Many investors consider themselves dividend investors. However, make sure you understand the company’s long-term prospects before you even start looking at the dividend. Do you understand the business model? What are the earnings 10-20 years down the line? Never base your decisions solely on the dividend. Make sure you invest by looking at estimated total returns. Total returns are determined by earnings growth, dividends, and multiple expansion/contraction.
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The dividend graphs below are taken from Borsdata.se unless stated otherwise.
Ambu’s business model:
Ambu has been in the business since 1937, but it’s during the last decade it has seen its “breakthrough”. The company develops and markets medical equipment and diagnostic products. The revenue has tripled over the last decade, from 1 bn to 3.5 bn DKR, mainly via organic growth.
Ambu’s dividend policy:
Ambu pays out 30% of the earnings as dividends.
The graph below is wrong. The dividend was 0.19 in 2014, 0.06 in 2013, and 0.15 DKR in 2012 (the share was split in five in December 2017).
Brdr. Hartmann’s business model:
Brdr. is in Danish and abbreviation for “brothers”.
The company is the world-leading producer of molded fiber packaging for eggs and fruits. The molds are typically made of paperboard, nowadays often recycled, and mostly used for food, fruit, and beverage. This is a very mature business and growth is slow. Moreover, the margins are thin. However, Hartmann has been in the business since 2017 and has shown resilience.
Brdr. Hartmann’s dividend policy:
The dividend was suspended in 2019. This was not due to the Covid-19, but due to expansion. Hartmann wants to set aside capital for future acquisitions. We believe the dividend will be resumed later with a higher dividend.
In previous years the payout ratio has been between 40-60 percent.
Össur’s business model:
Össur is an Icelandic company but has a dual listing in both Iceland and Copenhagen (in addition as an ADR on the OTC list). It develops, manufactures, and distributes orthopedic equipment. This is for example prosthetics, braces, compressions, etc.
Both the revenue and earnings per share have doubled over the last decade.
Össurs dividend policy:
The main priority is to keep a healthy balance sheet, and only then return cash to shareholders via dividends and buybacks.
At intervals, Össur has bought back blocks of shares, like for example in November 2014 when it bought back 2.2% of the shares.
The graph below is incorrect. Össur changed its dividend policy in 2012 and initiated a dividend at 0.1 DKR. Prior to 2012, the company used all its cash flow to pay back the debt. The dividend in 2013 was 0.1 and in 2014 raised to 0.12 DKR. The payout ratio is low, around 20-30% of earnings.
GN Store Nord:
GN Store Nord’s business model:
The company has a rather interesting history dating back to 1869. It was originally a telegraph company, later a telecom company, but today it’s manufacturing hearing aids and headsets. The growth has been explosive over the last five years with 13 CAGR in revenue, but a more impressive 23% CAGR in the earnings per share.
GN Store Nords dividend policy:
The most important priority is to have interest-bearing debt below two times the EBITDA. The second priority is to pay a steady or rising dividend. The payout ratio is still very low and we expect continued growth in the next years. GN Store Nord additionally buys back shares on a regular basis.
DSV Panalpina’s business model:
DSV is a transport and logistic company divided into three divisions: Road, Air & Sea, and Solutions. It was founded in 1976 by a group of nine local Danish transport companies, but have since then grown tremendously via acquisitions. The latest was the German company Panalpina, a deal that closed in 2019.
DSV Panalpina’s dividend policy:
DSV has paid a rising dividend for many years, but the priority in the capital allocation process is first to make sure the leverage ratio is within the debt covenants, second to make acquisitions, and third is to pay a rising dividend. We suspect the frequent buybacks have lower priority than the dividend.
Its main product is stone wool insulation for a variety of businesses, like for example homes, petrochemical industries, power plants, etc. This is not only heat insulation, but also for example noise insulation. They also have a consultancy business to improve energy efficiency and sustainability.
The dividend seeks to balance a steady to growing dividend with the capital requirements. The business is quite cyclical, thus we can expect a reduction if we hit a recession.
The dividend from 2008 until 2011 were 9.6 DKR every year, while 2012 it was increased to 10.2. The dividend was 9.6 for 2006 and 14.4 for 2007. Thus, it was reduced for 2008 when the GFC hit.
Novozymes’ business model:
Novozymes develops industrial enzymes and microorganisms. The products are used in crops, to improve animal health, extend the longevity of food products, treat wastewater, and reduce chemical use in many production facilities. It’s estimated that nearly five billion people use products containing their enzymes on a weekly basis.
Novozymes’ dividend policy:
The dividend is paid annually and is raised for 20 years in a row. As the above graph shows, Novozymes perform both buybacks and dividends.
Vestas Wind Systems:
Vestas’ business model:
Vestas is the largest producer of wind turbines in the world. Perhaps surprisingly, it’s been in the business since 1945, but obviously had a huge tailwind over the last two decades. This is a business that is here to stay.
Vestas’ dividend policy:
Vestas wants to be a global leader in the renewable business. Because of this, their main priority is to invest back into its business and we can expect to see 20-30% of the earnings paid out as dividends. Moreover, Vestas has also bought back shares over the last years.
The company has only paid a dividend since 2014. However, we believe it’s likely they will continue to do so.
Ørsted’s business model:
Ørsted claims it’s been ranked as the most sustainable company in the world. It’s part of a megatrend market: wind and solar power.
Ørsted’s dividend policy:
Per Aarsleff’s business model:
The business segments are all within civil engineering, contracting, and construction. They have a strong position in their home market in Denmark, but also in the Baltic region. Despite being a Danish company almost 32% of the income comes from abroad. The company has its name from the founder, who later turned over his ownership to a foundation that still controls the company.
Per Aarsleff’s dividend policy:
The aim is a moderate payout ratio of 20-40%, after evaluating the capital structure and future prospects.
Schouw & Co:
Schouw’s business model:
Schouw is an investment company that owns a variety of businesses, currently six portfolio businesses, the one most famous probably being Borg Automotive, GPV, and Biomar.
Schouw’s dividend policy:
The aim is to pay a stable or growing dividend, depending on the capital structure.
Novo-Nordisk’s business model:
Novo-Nordisk is a drug producer, mainly known for its insulin products. Diabetes 2 is, sadly, getting more and more common due to the Western lifestyle of too much food (and “wrong” food and too much inactivity). We get more and more insulin resistant. This has resulted in an enormous return for the Novo-Nordisk shareholders. Almost 80% of the revenue is from insulin products, the rest is mainly from growth hormones drugs.
Novo-Nordisk dividend policy:
The dividend has been increased every year for a long time, although the growth has slowed significantly over the last five years:
The dividend is paid twice a year: one interim dividend and a bigger final dividend. The Board of Directors has not specified a percentage of the earnings, but clearly, they aim to increase it every year. Novo-Nordisk always has a buyback program in place. Since 2005 the outstanding number of shares is reduced from 3.2 million to 2.4 million.
AP Moeller Maersk:
AO Moeller Maersk’s business model:
The company was founded in 1904 and is today owned by the fourth Møller Mærsk generation (Moeller Maersk is the international name, “ø” and “æ” being pretty unique letters only used in Danish and Norwegian).
AP Moller Maersk is structured into four main business segments: Ocean, Logistics & Services, Terminals & Towage, and Manufacturing & Others. Thus, it’s a cyclical company, and the total returns have been weak over the last two decades. In April 2019 their Drilling segment was spun-off and listed as a separate entity.
AP Moeller Maersk’s dividend policy:
We are in general skeptical to cyclical stocks, but this is somewhat offset by the dominant position of Moeller Maersk. However, this is not a growth stock, and this is reflected in the dividend:
Topdanmark’s business model:
Topdanmark is the second largest non-life insurance company in Denmark, after Tryg, and additionally has a life insurance segment that is the second biggest. Topdanmark is owned 47% by the Finnish financial conglomerate Sampo. For a better understanding of the insurance business, we recommend our write up on why we are long the Norwegian insurer Gjensidige.
Topdanmarks dividend policy:
Topdanmark’s dividend history is short. Up until 2017 the focus was solely on buybacks, something which is pretty unorthodox in the Nordic region. From 1998 to 2017 78% of the shares were cancelled. From 2017 the capital distributions are mainly in the form of dividends. At least 70% will be paid out.
Carlsberg’s business model:
Carlsberg probably needs little introduction, as it’s one of the world’s best-known brands: Probably the best beer in the world. The brewery was established in 1847 but has since then grown tremendously both via organic growth and acquisitions. Their presence is global, but the main markets are Europe and Asia. The company is controlled by the Carlsberg Foundation, set up in 1876 by the Carlsberg founder, and now controls about 75% of the votes and owns 30% of the shares.
Carlsberg can be called a sin-stock. Sin-stocks as a group have performed remarkably well over many decades. Read here for why they have outperformed.
Carlsberg dividend policy:
Carlsberg aims to pay out 50% of the earnings as dividends while buying back shares on a regular basis. All this is dependent on the debt being maximum two times the EBITDA.
Royal Unibrew’s business model:
The company is the second-biggest brewer in Denmark after Carlsberg but has better operational metrics. Royal Unibrew is mainly the result of the merger between Jyske and Faxe, two famous Danish brands. Danes are in general fond of their brands, and they both drink and smoke more than their Nordic neighbors. However, potential investors should be aware beer is only 35% of the turnover, while non-alcoholic drinks are 49% and other alcoholic beverages are 16%.
Royal Unibrew is, of course, much smaller than Carlsberg, as their “home market” is much smaller (mainly the Nordics and the Baltics).
Royal Unibrew can be called a sin-stock. Sin-stocks as a group have performed remarkably well over many decades. Read here for why they have outperformed. One of the main advantages with sin-stocks is that their products are often “recession-proof”.
Royal Unibrew’s dividend policy:
The aim is to pay out 40-60% of the earnings. The company has a high cash-conversion rate, on average 16% of the turnover ends up as free cash flow, and we estimate the potential dividend growth continues. Royal Unibrew has been a frequent buyer of their own shares, and this is likely to continue.
The dividend was suspended in 2014 in order to reduce debt.
Simcorp’s business model:
Simcorp is a software company, but specializing in products for the asset management industry. The clients are, for example, asset managers, insurance companies, banks, pension funds, etc. The main beaty of the business model is a high degree of recurring revenue and high switching costs. This has resulted in rapid growth and high returns on invested capital.
Simcorp’s dividend policy:
The policy is to distribute at least 40% of the earnings as dividends. The rest of the capital aims at buying back shares. Simcorp trades at high multiples, thus the dividend yield is very low.
The company is the worldwide leader in ostomy and incontinence products, a market which has grown better than the overall healthcare market for over two decades. Additionally, Coloplast has segments in wound care and interventional urology. It’s mostly a European company as about 60% of the revenue is from Europe. About 20% comes from emerging markets.
Coloplast is included in our Scandinavian/Nordic dividend portfolio. The company has a solid family controlling the company, it’s in a megatrend industry (healthcare).
Coloplast’s dividend policy:
Coloplast has increased its dividend every year since 1996. The dividend for 2019 was at first postponed in the spring of 2020, but it was paid in December 2020. Their track-record of increasing the dividend is intact. The dividend is paid twice per year: once in the spring and the last normally in December.
Tryg’s business model:
Tryg is an insurance company, and one of the “oligopoly” players of the Nordic Market. The big Nordic players are If, Gjensidige, and Tryg. The business is mainly “classical” property & casualty insurance. Tryg is a very profitable company with an average combined ratio of around 85 over the last five years. The combined ratio shows how profitable an insurance company is: it’s the sum of the costs (operating costs and claims paid out) divided by premiums received. Moreover, an insurance company can profit on the “float”.
To get a better understanding of both the business and Tryg, we recommend reading why we are long the Norwegian insurer Gjensidige.
All Pan-Nordic insurance companies are very profitable, which shows in their valuation, which is many multiples to book values.
Tryg’s dividend policy:
Tryg has not done any meaningful buybacks. Instead, all focus is on handing back excess capital to shareholders. The Nordic insurance market is a very mature market where it’s difficult to grow, thus we can expect the majority of earnings to be paid out as dividends. The target payout ratio is 60-90%, and supplemented by bonus dividends. The ordinary dividend has been increased every year since 2012:
H. Lundbeck’s business model:
H. Lundbeck was founded in 1915 as a trading company, but some years after its foundation it started importing medicines and cosmetics. Before WW2 it started making its own drugs and medical products, and today its main focus is on medicines to treat disorders and diseases of the central nervous system.
H. Lundbeck’s dividend policy:
The aim is to pay out 30-60% of the earnings as dividends. The dividend varies from year to year, but the trend is up: in 2002 the dividend was 1.14DKR, while the last dividend was 4.1 DKR. In the meantime it has been higher:
Lundbeck successfully, and wisely, bought back 5% of the shared during the GFC in 2008/09 when the share price suffered.
Scandinavian Tobacco Group:
Scandinavian Tobacco’s business model:
The company can track its roots a couple of hundred years back but has been acquired, divested, and reorganized multiple times. The current name was established in 2008. The business segments are Handmade Cigars, Machine-Made Cigars, Pipe Tobacco, and Fine-Cut Tobacco. Despite its name, almost 50% of the turnover derives from the USA.
Scandinavian Tobacco’s dividend policy:
STG’s objective is to distribute excess capital by way of buybacks and/or dividends. However, their actions clearly indicate they prefer dividends. The payout ratio has been over 80% for every year over the last five years.
The chart below shows both ordinary and bonus dividends over the last ten years:
Chr. Hansen Holding A/S:
We have covered the company in a separate article.
Chr. Hansen’s Holding dividend policy:
The priority is to first use the capital for organic growth, the second priority is bolt-on acquisitions, the third priority is to pay an ordinary dividend, and the fourth is to return excess capital back to shareholders. Depending on the priorities above, 40-60 of the earnings are paid as dividends.
From 2017 Chr. Hansen pays the dividend semi-annually: One in Jun/Jul and a bigger one in Nov/Dec.
Due to the Covid-19 Chr. Hansen put the dividend on hold until the divestment of the segment called Natural Colors, expected to happen in the first quarter of 2021. An extraordinary dividend is planned at that time.
Disclosure: We are not financial advisors. Please do your own due diligence and investment research or consult a financial professional. All articles are our opinion – they are not suggestions to buy or sell any securities.