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Johnson & Johnson: Dividend Stock Royalty

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Tuesday, 15 January 2019 11:51 AM Current | Bio | Archive

Investors looking for high-quality dividend growth stocks should consider the list of Dividend Aristocrats, which includes 53 companies in the S&P 500 that have increased their dividends for 25+ consecutive years.

There is an even more exclusive list of dividend stocks known as the Dividend Kings, which have increased their dividends for at least 50 years in a row.

Johnson & Johnson (JNJ) is a Dividend Aristocrat and a Dividend King, having increased its dividend payout for the past 56 years in a row. It is the only healthcare stock on the list of Dividend Kings, and should continue to raise its dividend each year for the long-term.

Recent Fears Are Overblown

Johnson & Johnson is a diversified healthcare giant, with large pharmaceutical, medical device, and consumer healthcare businesses. The company generates total revenue in excess of $81 billion per year.

Shares of Johnson & Johnson have declined 12% in the past one year, underperforming the S&P 500 in that time. The company is facing a heightened level of risk since a recent report that the company was aware of possible contaminants in its talc powder going back to the late 1950’s. There are approximately 12,000 product liability lawsuits related to its baby powder.

The elevated risk of a severe financial penalty has eroded investor sentiment, and explains the poor performance of the stock in the past several months. However, Johnson & Johnson has issued a statement of its own, reiterating its assertion that its talc powder has not caused cancer.

Indeed, there is a risk that Johnson & Johnson could see a large fine or other financial penalty from the lawsuits. However, the long-term fundamentals of the company should not be affected. Johnson & Johnson continues to post strong financial results.

For the most recent quarter, the company reported 4% revenue growth, balanced across the United States and international regions. The pharmaceutical segment led the way for the company, with 8% organic sales growth. EPS on an adjusted basis increased 8% for the quarter.

Johnson & Johnson’s pharmaceutical segment is its biggest driver of future growth. The company recently announced a number of price increases across its pharmaceutical portfolio. The increases include top sellers Stelara, Zytiga, and Xarelto. The company says average list price increase on its drugs will be about 4% in 2019.

A Dividend Growth Stock For The Ages

Despite the unusual challenges facing Johnson & Johnson, the company still expects up to 6.0% sales growth for 2018, along with 10% EPS growth. This will easily allow the company to continue its impressive record of dividend growth. With expected EPS of $8.13 to $8.18 for 2018 and a current dividend payout of $3.60, Johnson & Johnson is expected to have a dividend payout ratio of 44%.

Johnson & Johnson has a low dividend payout ratio, a strong balance sheet, and long-term growth opportunities. These qualities make Johnson & Johnson a part of dividend stock royalty.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.

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BenReynolds
Johnson & Johnson has a low dividend payout ratio, a strong balance sheet, and long-term growth opportunities. These qualities make Johnson & Johnson a part of dividend stock royalty.
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2019-51-15
Tuesday, 15 January 2019 11:51 AM
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