Updated on October 24th, 2024 by Felix Martinez
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 only 53 companies meet the requirement to become a Dividend King is evidence of this.
You can see all 53 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 62 consecutive years, one of the longest growth streaks found anywhere in the stock market.
This healthcare giant is one of the 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.
Source: Investor Presentation
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 it has for several years.
Johnson & Johnson reported third-quarter 2024 sales growth of 5.2%, reaching $22.5 billion, with operational growth of 6.3%. However, earnings per share (EPS) decreased by 34.3%, largely due to a one-time special charge and acquired in-process research and development (IPR&D). Adjusted EPS fell 9.0% to $2.42, driven by the same IPR&D impact. The company made significant advancements, including approvals for treatments like TREMFYA and RYBREVANT, and the submission of a new general surgery robotic system, OTTAVA.
Regionally, U.S. sales rose 7.6%, while international markets saw a 2.2% increase, resulting in total worldwide sales growth of 5.2%. The Innovative Medicine segment posted 6.3% growth, boosted by oncology and immunology products. MedTech also saw a 6.4% increase, with growth driven by cardiovascular products and acquisitions. Despite some product category slowdowns, both segments contributed to the company’s positive performance.
Johnson & Johnson revised its full-year 2024 guidance to reflect better operational performance and the impact of its acquisition of V-Wave. The company anticipates adjusted operational EPS to reach $9.91, slightly down from previous estimates due to acquisition costs. Sales for 2024 are expected to grow between 6.3% and 6.8%, demonstrating confidence in sustained growth despite short-term earnings pressures.
Source: Investor Presentation
Competitive Advantages & Recession Performance
Johnson & Johnson has multiple advantages over its competitors.
Johnson & Johnson’s size and scale are unmatched in its industry. It also has a AAA credit rating from Standard & Poor’s and Moody’s Investors Service, which is higher than the U.S. government’s.
Microsoft Corporation (MSFT) is the only other company with a AAA credit rating.
The company’s size and scale and 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 to bring new products to market. This investment has resulted in the company’s 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. With six decades of dividend growth, Johnson & Johnson is likely to continue increasing its dividend well into the future.
Johnson & Johnson’s competitive advantages and recession performance make the stock an excellent defensive stock.
Valuation & Expected Returns
With a current share price of $164 and expected earnings-per-share of $9.93 for the year, Johnson & Johnson has a price-to-earnings ratio of 16.5.
We view the stock as slightly undervalued, with a fair value P/E estimate of 17. Expansion of the P/E multiple from 16.5 to 17 would increase annual returns by 0.6% 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 3.0%. Therefore, total annual returns are expected as follows:
- 6.0% EPS growth
- 0.6% multiple expansion
- 3.0% dividend yield
Overall, Johnson & Johnson is expected to offer a total annual return of 9.6% through 2029. This makes the stock a hold as the expected return is below 10%.
Final Thoughts
Few Dividend Kings are as well-known or popular among dividend growth investors as Johnson & Johnson.
For good reason, Johnson & Johnson’s diversified business model has allowed the company to endure several recessions and still increase its dividends for the past 62 years. This growth streak is nearly unmatched.
Overall, projected returns earn the stock a hold 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