Organon & Co. (NYSE: OGN) is a global healthcare company known for its diverse portfolio of prescription medicines, biosimilars, and over-the-counter products. Currently, it offers an incredibly high dividend that yields 8.7% -- vastly more than the S&P 500 average of 1.7%. But is this a dividend that is too good to be true, or can it be worth adding to your portfolio today?
The company recently released its financial report for the third quarter, which should provide investors with some good insight about the strength of the payout. For the period, which ended Sept. 30, Organon reported $1.5 billion in revenue, which was down 1% year over year. CEO Kevin Ali said that, “over the medium term, we expect to deliver mid-single digit revenue growth with the power of our existing portfolio. As we move into 2024, we will be working to reduce leverage and continue to add products that could enhance that growth profile.”
However, with operating expense and cost of sales totaling $1.4 billion and rising by 15% year over year, the company’s net income totaled just $58 million. On a per-share basis, that equates to $0.23. That is problematic given the company’s quarterly dividend is $0.28. Over the past three quarters, Organon’s diluted earnings per share totaled $1.86, which averages out to $0.62, and that would suggest the dividend is still manageable.
For now, it’s a bit too early to tell if Organon will be able to sustain this dividend. The company needs to set aside money to pay down debt plus invest in growth opportunities, so it could be a challenge for the payout to continue. As a result, investors may want to take a wait-and-see approach with the stock rather than buying it right now.
