Assessing JNJ's Dividend Sustainability and Growth Prospects
Johnson & Johnson (JNJ, Financial) recently announced a dividend of $1.19 per share, payable on 2024-03-05, with the ex-dividend date set for 2024-02-16. 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, distributing dividends on a quarterly basis. Notably, Johnson & Johnson has increased its dividend each year since 1963, earning it the prestigious title of a dividend king, a recognition given to companies with at least 50 consecutive years of dividend increases. Below is a chart showing annual Dividends Per Share to track historical trends.
Breaking Down Johnson & Johnson's Dividend Yield and Growth
As of today, Johnson & Johnson boasts a 12-month trailing dividend yield of 3.00% and a 12-month forward dividend yield of 3.04%, indicating an expected increase in dividend payments over the next year. Over the past three years, the company's annual dividend growth rate was 5.90%, and this rate increased to 6.00% per annum over a five-year span. Furthermore, the annual dividends per share growth rate over the past decade has been 6.30%.
Considering Johnson & Johnson's dividend yield and five-year growth rate, the 5-year yield on cost of Johnson & Johnson stock is approximately 4.01%.
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. With a ratio of 0.49 as of 2023-12-31, Johnson & Johnson retains a significant part of its earnings for future growth and unexpected downturns.
The company's profitability rank is 9 out of 10, indicating good profitability prospects. Johnson & Johnson has also reported positive net income each year over the past decade, further solidifying its financial strength.
Growth Metrics: The Future Outlook
Johnson & Johnson's robust growth rank of 9 out of 10 suggests a promising growth trajectory. The company's revenue per share has grown at an average annual rate of approximately 5.20%, albeit underperforming 53.14% of global competitors. Furthermore, the 3-year EPS growth rate of 4.40% per year, while below 60.5% of global competitors, is still a positive indicator. The company's 5-year EBITDA growth rate of 43.60% also outperforms 7.87% of global competitors, showcasing its strong earnings before interest, taxes, depreciation, and amortization.
Conclusion: Evaluating JNJ's Dividend Prospects
Johnson & Johnson's consistent dividend growth, reasonable payout ratio, and strong profitability rank paint a reassuring picture for investors seeking stable dividend income. While some growth metrics indicate room for improvement, the company's overall financial health suggests that its dividends are sustainable in the long term. Investors looking for high-dividend yield opportunities may find Johnson & Johnson an attractive option, especially with the added security of its status as a dividend king. For more dividend stock analysis, GuruFocus Premium users can explore options using the High Dividend Yield Screener.
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.
