Dividend Aristocrats In Focus: Kenvue

Up to date on Might twenty first, 2024 by Bob Ciura

The Dividend Aristocrats encompass 68 firms within the S&P 500 Index which have raised their dividends for at the least 25 years in a row. Most of the firms have became enormous multi-national companies over the a long time.

You’ll be able to see the complete record of all 68 Dividend Aristocrats right here.

We created a full record of all Dividend Aristocrats, together with necessary monetary metrics like price-to-earnings ratios and dividend yields. You’ll be able to obtain your copy of the Dividend Aristocrats record by clicking on the hyperlink under:

Disclaimer: Certain Dividend isn’t affiliated with S&P World in any means. S&P World owns and maintains The Dividend Aristocrats Index. The data on this article and downloadable spreadsheet is predicated on Certain Dividend’s personal overview, abstract, and evaluation of the S&P 500 Dividend Aristocrats ETF (NOBL) and different sources, and is supposed to assist particular person traders higher perceive this ETF and the index upon which it’s primarily based. Not one of the info on this article or spreadsheet is official knowledge from S&P World. Seek the advice of S&P World for official info.

Kenvue Inc. (KVUE) is a latest addition to the Dividend Aristocrats record, having been spun off from former mother or father firm Johnson & Johnson (JNJ) in 2023.

As a spin-off, Kenvue carries its former mother or father firm’s dividend development historical past, and is itself a Dividend Aristocrat.

This text will analyze Kenvue’s enterprise mannequin, future development catalysts, and anticipated returns.

Enterprise Overview

Kenvue operates within the healthcare sector as a shopper merchandise producer. In Might 2023, Kenvue was spun off from Johnson & Johnson. Now, Kenvue operates three segments: Self Care, Pores and skin Well being & Magnificence, and Important Well being.

Self Care’s product portfolio consists of cough, chilly, allergy, smoking cessation, and ache care merchandise amongst others. Pores and skin Well being & Magnificence holds merchandise equivalent to face, physique, hair, and solar care.

Important Well being accommodates merchandise for girls’s well being, wound care, oral care, and child care.

Effectively-known manufacturers in Kenvue’s product line up embrace Tylenol, Listerine, Band-Help, Neutrogena, Nicorette, and Zyrtec.

Supply: Investor Presentation

On Might seventh, 2024, Kenvue reported first-quarter earnings outcomes. Income elevated 1.1% to $3.9 billion and was $110 million higher than anticipated. Adjusted earnings-per-share totaled $0.28, beating estimates by $0.03.

Natural gross sales grew 1.9% for the quarter. Pricing added 5.0% to gross sales development, partially offset by a 3.1% lower in quantity. Outcomes have been up towards a tricky comparable interval the place retailer stock re-builds have been particularly robust.

Self Care and Important Well being, led by Oral Care, have been the perfect performing companies throughout the firm whereas Pores and skin Well being and Magnificence have been weaker for the interval.

Kenvue additionally reaffirmed prior steerage for 2024. The corporate continues to anticipate income development to be in a variety of 1.0% to three.0% and adjusted earnings-per-share in a variety of $1.10 to $1.20 for the 12 months.

Development Prospects

Previous to the spin-off, Johnson & Johnson produced annual earnings development of seven% for the 2013 to 2022 interval as the corporate’s diversification allowed it to be one of many extra steady firms out there place.

At this time, Kenvue consists of simply the patron merchandise companies, which have been typically produced the bottom ranges of development.

For its half, Kenvue administration expects the corporate to generate natural income development round 3%-4% per 12 months. Subsequently, we anticipate that Kenvue will develop earnings-per-share by 3% yearly by 2028.

Johnson & Johnson’s dividend development streak of 61 consecutive years is among the longest out there place. Consequently, Kenvue is each a Dividend King and a Dividend Aristocrat.

We consider that penchant for dividend development is in Kenvue’s enterprise DNA.

Aggressive Benefits & Recession Efficiency

Kenvue’s former mother or father firm Johnson & Johnson has confirmed to be one of the profitable firms at navigating recessions.

Although Kenvue now not advantages from its mother or father firm’s diversification, we consider that it could show equally efficient at dealing with financial downturns.

Since Kenvue was a subsidiary of Johnson & Johnson in the course of the Nice Recession of 2008-2009, there isn’t any knowledge on its earnings-per-share efficiency throughout that point.

Nevertheless, traders can moderately infer that Kenvue would show an identical diploma of resilience throughout recessions as its former mother or father firm.

The corporate’s merchandise, equivalent to Band-Help and Tylenol, are wanted whatever the state of the financial system as they deal immediately with customers’ well being and well-being. As trusted merchandise, they want proceed to carry out nicely even beneath adversarial situations.

Total, Kenvue ought to proceed to lift its dividend for a lot of extra years because of its low payout ratio, its first rate resilience to recessions, and its wholesome steadiness sheet.

Valuation & Anticipated Returns

We anticipate Kenvue to generate adjusted earnings-per-share of $1.15 for 2024. Subsequently, shares of Kenvue at the moment commerce for a price-to-earnings ratio of 17.4.

For context, Johnson & Johnson shares have a mean price-to-earnings ratio of near 19 since 2013.

Countering the truth that Kenvue holds a number of the trade main manufacturers with that its merchandise have been the decrease margin companies throughout the mother or father firm, we’ve a goal price-to-earnings ratio of 14 for the inventory.

This suggests a future headwind from P/E a number of contraction.

Subsequently, valuation might scale back annual returns by 4.3% if the inventory have been to achieve our goal a number of by 2028. Constructive returns shall be generated by EPS development (estimated at 3% per 12 months) and dividends.

On July twentieth, 2023, Kenvue introduced its first-ever quarterly dividend of $0.20 per share. The annualized payout of $0.80 per share represents a present yield of 4.0%.

Placing all of it collectively, whole returns are anticipated at 2.7% per 12 months by 2028.

Remaining Ideas

Kenvue is a comparatively new addition to the Dividend Aristocrats record. After a long time as a part of Johnson & Johnson, Kenvue turned an unbiased entity in 2023.

Whereas we discover the legacy enterprise to be recession-resistant and the excessive dividend yield to be engaging for revenue traders, the entire return profile isn’t excessive sufficient for a purchase suggestion. We price KVUE inventory to be a promote resulting from valuation.

Moreover, the next Certain Dividend databases comprise probably the most dependable dividend growers in our funding universe:

The Dividend Champions: Dividend shares with 25+ years of dividend will increase, together with these that will not qualify as Dividend Aristocrats.
The Finest DRIP Shares: The highest 15 Dividend Aristocrats with no-fee dividend reinvestment plans.

In the event you’re on the lookout for shares with distinctive dividend traits, take into account the next Certain Dividend databases:

The most important home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: