Updated on September 19th, 2023 by Bob Ciura
Only the best companies can increase dividends through multiple recessions.
The Dividend Kings are a group of stocks that have raised dividends for at least 50 years. Accomplishing this task is no small feat. The fact that there are just 50 companies that meet the requirement to become a Dividend King is evidence of this.
You can see all 50 Dividend Kings here.
You can also download an Excel spreadsheet with the full list of Dividend Kings (plus important metrics such as price-to-earnings ratios and dividend yields) by clicking on the link below:
Johnson & Johnson (JNJ) has increased its dividend for 61 consecutive years, one of the longest growth streaks found anywhere in the stock market.
This healthcare giant is one of most popular dividend growth stocks because of its excellent recession-resistant business model, and dividend track record.
Johnson & Johnson stock remains an excellent holding for long-term dividend growth.
Business Overview
Johnson & Johnson was founded in 1886 and has transformed into one of the largest companies in the world. Johnson & Johnson is a mega-cap stock with a market capitalization of $390 billion. The company generates annual sales above $99 billion.
Johnson & Johnson operates a diversified business model, allowing it to appeal to a wide variety of customers within the healthcare sector. J&J now operates two segments, pharmaceuticals and medical devices, after spinning off its consumer health franchises.
On May 4th, 2023, Kenvue began trading on the New York Stock Exchange under the ticker symbol KVUE.
Source: Investor Presentation
J&J believes the separation will unlock value. The goal is that the two companies will garner a higher cumulative valuation than they would as a single entity.
We believe that the company will continue to be a top dividend growth name for investors to own following the separation.
Growth Prospects
We expect Johnson & Johnson to generate 6% annual earnings-per-share growth over the next five years. The pharmaceutical segment will continue to be the company’s main growth driver, as has been the case for several years.
On July 20th, 2023, Johnson & Johnson announced results for the second quarter for the period ending June 30th, 2023. For the quarter, revenue grew 6.4% to $25.5 billion, which was $860 million more than expected. Adjusted earnings-pershare of $2.80 compared favorably to $2.59 in the prior year and was $0.18 more than anticipated.
Source: Investor Presentation
Pharmaceutical revenues grew 3.1% on a reported basis (up 7.2% excluding currency exchange). Oncology was higher by 8.8% (+9.7%) as Darzalex, which treats multiple myeloma, continues to grow market share. Immunology was up 1.9% (+2.6%) due to market share gains for Stelara, which treats immunemediated inflammatory diseases.
MedTech was the best performing segment, with revenue growing 12.9%, or 14.7% in constant currencies.
Johnson & Johnson revised its guidance for 2023 as well. The company now expects revenue in a range of $98.8 billion to $99.8 billion for the year, up from $97.9 billion to $98.9 billion. Adjusted earnings-per-share is expected in a range of $10.70 to $10.80, up from $10.60 to $10.70.
Competitive Advantages & Recession Performance
Johnson & Johnson has multiple advantages over its competitors.
The company’s size and scale are unmatched in its industry. Johnson & Johnson also has a AAA credit rating from Standard & Poor’s and Moody’s Investors Service. This is a higher credit rating than the U.S. government.
The only other company to have a AAA credit rating is Microsoft Corporation (MSFT).
The company’s size and scale, in addition to its credit rating, provide Johnson & Johnson the financial flexibility to make acquisitions to fuel further growth.
Johnson & Johnson also invests heavily in research and development in order to bring new products to market. The result of this investment is that the company has a large portfolio of brands that lead their respective categories.
These competitive advantages allowed Johnson & Johnson to weather multiple recessions. Listed below are the company’s earnings-per-share results before, during, and after the last major recession:
- 2006 earnings-per-share: $3.76
- 2007 earnings-per-share: $4.15 (9.4% increase)
- 2008 earnings-per-share: $4.57 (10.1% increase)
- 2009 earnings-per-share: $4.63 (1.3% increase)
- 2010 earnings-per-share: $4.76 (2.8% increase)
Johnson & Johnson had EPS growth of almost 12% from 2007 through 2009, an impressive accomplishment given the circumstances of the Great Recession.
The company’s dividend also continued to grow. And with six decades of dividend growth, it is likely that Johnson & Johnson will continue to increase its dividend well into the future.
Johnson & Johnson’s competitive advantages and its recession performance make the stock an excellent defensive stock to hold.
Valuation & Expected Returns
With a current share price of $162 and expected earnings-per-share of $10.75 for the year, Johnson & Johnson has a price-to-earnings ratio of 15.0.
We view the stock as slightly undervalued, with a fair value P/E estimate of 17. Expansion of the P/E multiple from 15 to 17 would increase annual returns by 2.5% over the next five years.
Total returns will also consist of earnings growth and dividends.
Given the company’s competitive advantages and recent business performance, we feel that a 6% average annual EPS growth rate is achievable over the next five years.
Finally, Johnson & Johnson stock has a current dividend yield of 2.9%. Therefore, total annual returns are expected as follows:
- 6.0% EPS growth
- 2.5% multiple expansion
- 2.9% dividend yield
Overall, Johnson & Johnson is expected to offer a total annual return of 11.4% through 2028. This makes the stock a buy as the expected return is above 10%.
Final Thoughts
When it comes to the Dividend Kings, few are as well-known or as popular among dividend growth investors as Johnson & Johnson.
And for good reason: Johnson & Johnson’s diversified business model has allowed the company to endure several recessions and still increase its dividend for the past 61 years. This growth streak is nearly unmatched.
Overall, projected returns earn the stock a buy recommendation.
The following articles contain stocks with very long dividend or corporate histories, ripe for selection for dividend growth investors:
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~400 stocks with 10+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
- The Best DRIP Stocks: The top 15 Dividend Aristocrats with no-fee dividend reinvestment plans.
- The High ROIC Stocks List: The top 10 stocks with high returns on invested capital.
- The High Beta Stocks List: The 100 stocks in the S&P 500 Index with the highest beta.
- The Low Beta Stocks List: The 100 stocks in the S&P 500 Index with the lowest beta
- The Complete List of Russell 2000 Stocks
- The Complete List of NASDAQ-100 Stocks