Understanding the Sustainability of JNJ's Dividend Payments
Johnson & Johnson (JNJ, Financial) recently announced a dividend of $1.19 per share, payable on 2023-12-05, with the ex-dividend date set for 2023-11-20. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Johnson & Johnson's dividend performance and assess its sustainability.
What Does Johnson & Johnson Do?
Johnson & Johnson is the world's largest and most diverse healthcare firm. Three divisions make up the firm: pharmaceutical, medical devices and diagnostics, and consumer. The drug and device groups represent close to 80% of sales and drive the majority of cash flows for the firm. The drug division focuses on the following therapeutic areas: immunology, oncology, neurology, pulmonary, cardiology, and metabolic diseases. The device segment focuses on orthopedics, surgery tools, vision care, and a few smaller areas. The last segment of consumer focuses on baby care, beauty, oral care, over-the-counter drugs, and women's health. The consumer group is being divested in 2023 under the new name Kenvue. Geographically, just over half of total revenue is generated in the United States.
A Glimpse at Johnson & Johnson's Dividend History
Johnson & Johnson has maintained a consistent dividend payment record since 1963, with dividends currently distributed on a quarterly basis. The company has increased its dividend each year since 1963, earning it the prestigious title of a dividend king, a recognition given to companies that have increased their dividend each year for at least the past 60 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Johnson & Johnson's Dividend Yield and Growth
As of today, Johnson & Johnson currently has a 12-month trailing dividend yield of 3.10% and a 12-month forward dividend yield of 3.18%, indicating an expectation of increased dividend payments over the next 12 months. Over the past three years, Johnson & Johnson's annual dividend growth rate was 5.90%, which increased to 6.00% per year over a five-year horizon. Over the past decade, the annual dividends per share growth rate stands at 6.30%. Based on Johnson & Johnson's dividend yield and five-year growth rate, the 5-year yield on cost of Johnson & Johnson stock as of today is approximately 4.15%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. As of 2023-09-30, Johnson & Johnson's dividend payout ratio is 0.87, which may suggest that the company's dividend may not be sustainable.
Johnson & Johnson's profitability rank, as of 2023-09-30, is 9 out of 10, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
Johnson & Johnson's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Its revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model, with an increase of approximately 5.20% per year on average, though this underperforms approximately 53.05% of global competitors. The company's 3-year EPS growth rate, which is approximately 4.40% per year on average, underperforms approximately 60.22% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 43.60%, underperforms approximately 7.65% of global competitors.
Next Steps
In conclusion, Johnson & Johnson's long-standing history as a dividend king and its consistent dividend growth rate speak to its commitment to shareholder returns. However, the high payout ratio raises questions about the sustainability of future dividends, despite the company's strong profitability and growth rankings. Investors must weigh these factors, along with the company's revenue and earnings performance, when considering Johnson & Johnson's dividends. For those seeking high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener for further research and investment opportunities.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
