Up to date on September nineteenth, 2023 by Bob Ciura
Solely one of the best corporations can improve dividends by way of a number of recessions.
The Dividend Kings are a bunch of shares which have raised dividends for a minimum of 50 years. Carrying out this job is not any small feat. The truth that there are simply 50 corporations that meet the requirement to develop into a Dividend King is proof of this.
You possibly can see all 50 Dividend Kings right here.
You can too obtain an Excel spreadsheet with the total listing of Dividend Kings (plus essential metrics reminiscent of price-to-earnings ratios and dividend yields) by clicking on the hyperlink under:
Johnson & Johnson (JNJ) has elevated its dividend for 61 consecutive years, one of many longest progress streaks discovered anyplace within the inventory market.
This healthcare large is one among hottest dividend progress shares due to its glorious recession-resistant enterprise mannequin, and dividend monitor report.
Johnson & Johnson inventory stays a wonderful holding for long-term dividend progress.
Enterprise Overview
Johnson & Johnson was based in 1886 and has remodeled into one of many largest corporations on the planet. Johnson & Johnson is a mega-cap inventory with a market capitalization of $390 billion. The corporate generates annual gross sales above $99 billion.
Johnson & Johnson operates a diversified enterprise mannequin, permitting it to enchantment to all kinds of consumers throughout the healthcare sector. J&J now operates two segments, prescribed drugs and medical gadgets, after spinning off its shopper well being franchises.
On Might 4th, 2023, Kenvue started buying and selling on the New York Inventory Change beneath the ticker image KVUE.
Supply: Investor Presentation
J&J believes the separation will unlock worth. The objective is that the 2 corporations will garner the next cumulative valuation than they’d as a single entity.
We imagine that the corporate will proceed to be a high dividend progress title for traders to personal following the separation.
Progress Prospects
We anticipate Johnson & Johnson to generate 6% annual earnings-per-share progress over the following 5 years. The pharmaceutical phase will proceed to be the corporate’s predominant progress driver, as has been the case for a number of years.
On July twentieth, 2023, Johnson & Johnson introduced outcomes for the second quarter for the interval ending June thirtieth, 2023. For the quarter, income grew 6.4% to $25.5 billion, which was $860 million greater than anticipated. Adjusted earnings-pershare of $2.80 in contrast favorably to $2.59 within the prior yr and was $0.18 greater than anticipated.
Supply: Investor Presentation
Pharmaceutical revenues grew 3.1% on a reported foundation (up 7.2% excluding forex change). Oncology was greater by 8.8% (+9.7%) as Darzalex, which treats a number of myeloma, continues to develop market share. Immunology was up 1.9% (+2.6%) resulting from market share positive aspects for Stelara, which treats immunemediated inflammatory ailments.
MedTech was one of the best performing phase, with income rising 12.9%, or 14.7% in fixed currencies.
Johnson & Johnson revised its steering for 2023 as nicely. The corporate now expects income in a spread of $98.8 billion to $99.8 billion for the yr, up from $97.9 billion to $98.9 billion. Adjusted earnings-per-share is predicted in a spread of $10.70 to $10.80, up from $10.60 to $10.70.
Aggressive Benefits & Recession Efficiency
Johnson & Johnson has a number of benefits over its rivals.
The corporate’s measurement and scale are unmatched in its trade. Johnson & Johnson additionally has a AAA credit standing from Commonplace & Poor’s and Moody’s Buyers Service. This can be a greater credit standing than the U.S. authorities.
The one different firm to have a AAA credit standing is Microsoft Company (MSFT).
The corporate’s measurement and scale, along with its credit standing, present Johnson & Johnson the monetary flexibility to make acquisitions to gasoline additional progress.
Johnson & Johnson additionally invests closely in analysis and improvement to be able to carry new merchandise to market. The results of this funding is that the corporate has a big portfolio of manufacturers that lead their respective classes.
These aggressive benefits allowed Johnson & Johnson to climate a number of recessions. Listed under are the corporate’s earnings-per-share outcomes earlier than, throughout, and after the final main recession:
2006 earnings-per-share: $3.76
2007 earnings-per-share: $4.15 (9.4% improve)
2008 earnings-per-share: $4.57 (10.1% improve)
2009 earnings-per-share: $4.63 (1.3% improve)
2010 earnings-per-share: $4.76 (2.8% improve)
Johnson & Johnson had EPS progress of just about 12% from 2007 by way of 2009, a powerful accomplishment given the circumstances of the Nice Recession.
The corporate’s dividend additionally continued to develop. And with six a long time of dividend progress, it’s seemingly that Johnson & Johnson will proceed to extend its dividend nicely into the long run.
Johnson & Johnson’s aggressive benefits and its recession efficiency make the inventory a wonderful defensive inventory to carry.
Valuation & Anticipated Returns
With a present share worth of $162 and anticipated earnings-per-share of $10.75 for the yr, Johnson & Johnson has a price-to-earnings ratio of 15.0.
We view the inventory as barely undervalued, with a good worth P/E estimate of 17. Growth of the P/E a number of from 15 to 17 would improve annual returns by 2.5% over the following 5 years.
Whole returns may also encompass earnings progress and dividends.
Given the corporate’s aggressive benefits and up to date enterprise efficiency, we really feel {that a} 6% common annual EPS progress price is achievable over the following 5 years.
Lastly, Johnson & Johnson inventory has a present dividend yield of two.9%. Subsequently, complete annual returns are anticipated as follows:
6.0% EPS progress
2.5% a number of growth
2.9% dividend yield
General, Johnson & Johnson is predicted to supply a complete annual return of 11.4% by way of 2028. This makes the inventory a purchase because the anticipated return is above 10%.
Last Ideas
Relating to the Dividend Kings, few are as well-known or as widespread amongst dividend progress traders as Johnson & Johnson.
And for good cause: Johnson & Johnson’s diversified enterprise mannequin has allowed the corporate to endure a number of recessions and nonetheless improve its dividend for the previous 61 years. This progress streak is almost unmatched.
General, projected returns earn the inventory a purchase advice.
The next articles comprise shares with very lengthy dividend or company histories, ripe for choice for dividend progress traders:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to [email protected].
