Tuesday, April 20, 2021

Johnson & Johnson (JNJ) Hikes Dividends By 5%

 Johnson & Johnson (JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices & Diagnostics. This dividend king has paid dividends since 1944. Dividend increases have been like clockwork every year for decades. Check my analysis of Johnson & Johnson (JNJ) for more information about the company.

I just read that Johnson & Johnson (JNJ) has hiked dividends by 4.95% to $1.06/share. This marked the 59th consecutive annual dividend increase for this dividend kingThere are only 29 companies in the US which have managed to increase dividends annually for at least 50 years in a row.

Over the past decade, Johnson & Johnson has managed to grow dividends at an annualized rate of 6.60%/year.

When reviewing press releases that discuss dividend increases, I always find it helpful to see the tone from top management. I especially liked what the CEO had to say (Source: Press Release):

"Despite a year of unprecedented disruption, Johnson & Johnson remained committed to its established financial principles that strengthen our ability to drive long-term value for stakeholders. In recognition of our notable 2020 results, strong financial position and confidence in the future of Johnson & Johnson, the Board of Directors has voted to increase the quarterly dividend for the 59th consecutive year," said Alex Gorsky, Chairman and Chief Executive Officer of the company.

This dividend increase is a testament to the stability of the business model. Johnson & Johnson was one of the first companies to raise dividends in April 2020, amidst the uncertainty of the Covid-19 pandemic. It has also delivered during the last few crises, such as during the Global Financial Crisis of 2007 - 2009. When other companies cite current conditions as unprecedented,  Johnson & Johnson actually can provide guidance on revenues and earnings. It is always reassuring to understand that long term fundamentals remain intact, no matter what life throws at this business.

The company lifted its 2021 guidance to $9.42 - $9.57/share. This strong performance is one of the reasons behind the 59th consecutive annual dividend increase. (Press Release)

The valuation seems fine today at 17.10 times forward earnings, albeit it would always be better if the stock is available at a lower price. The stock yields 2.60%.

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1 comment:

  1. Nice, JNJ was my first US company bought back in 2017 for 117$, it gets you sentimental like first love or firs car :D Back then it paid 0,8$/Q and had a 2,7% yield. Now that its 1,06$/Q after 4y YOC is 3,6%. Wonder how that will look at 2027 or one decade after the investment :)

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