Updated on October 5th, 2022 by Nathan Parsh
Companies that raise dividends over long periods of time can do so largely because they are well-managed businesses that provide products or services that customers require regardless of economic conditions.
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 45 companies that meet the requirement to become a Dividend King is evidence of this.
You can see all 45 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 60 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.
Johnson & Johnson was founded in 1886 and has transformed into one of the largest companies in the world. The company has a market capitalization above $429 billion. The company generates annual sales above $98 billion.
Johnson & Johnson operates a diversified business model, allowing it to appeal to a wide variety of customers within the healthcare sector. The company operates 3 business segments: pharmaceuticals, medical devices, and consumer health.
However, this will soon change. J&J announced it will spin off its consumer health business.
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 that is expected to take place sometime during 2023.
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 19th, 2022, Johnson & Johnson released second quarter earnings results for the period ending June 30th, 2022. Total revenue grew 3% to $24 billion, while adjusted earnings–per–share of $2.59 compared favorably to $2.48 in the prior year.
Source: Investor Presentation
Pharmaceutical revenue grew 3%, led by a 14% increase in oncology. Major growth products include Darzalex, which treats multiple myeloma, and Imbruvica, which treats lymphoma. Meanwhile, immunology sales increased 4.3%, driven by higher demand for Stelara, which treats immune–mediated inflammatory diseases.
Medical devices and consumer sales both fell slightly more than 1% year-over-year.
Johnson & Johnson also provided updated guidance for 2022. The company now expects adjusted earnings–per–share of $10.00 to $10.10 for the year, down from $10.15 to $10.30 previously. At the midpoint, this would be a 2.6% increase from 2021.
Revenue is now expected to be $93.3 billion to $94.3 billion for 2022, down from prior estimates of $97.3 billion to $98.3 billion.
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 company’s R&D budget in 2021 was $14.7 billion.
The result of this investment is that the company has a large portfolio of brands that lead their respective categories. In fact, J&J has approximately 30 individual platforms or products that generate $1 billion or more in annual sales.
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 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)
- 2011 earnings-per-share: $5.00 (5% 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 shareholders will continue to receive annual dividend raises well into the future.
Johnson & Johnson’s competitive advantages and its recession performance make the stock an excellent defensive name to hold.
Valuation & Expected Returns
With a current share price of $163 and expected earnings-per-share of $10.05 for the year, Johnson & Johnson has a price-to-earnings ratio of 16.2.
We view the stock as slightly undervalued, with a fair value P/E estimate of 17. Expansion of the P/E multiple from 16.2 to 17 would increase annual returns by 0.9% 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, using the annualized dividend of $4.52 per share, Johnson & Johnson currently offers a dividend yield of 2.6%. Therefore, total returns are expected as follows:
- 6% earnings growth
- 0.9% multiple expansion
- 2.8% dividend yield
Overall, Johnson & Johnson is expected to offer a total annual return of 9.7% through 2027. This makes the stock a hold, but not quite a buy as the expected returns are below 10%.
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 60 years. This growth streak is nearly unmatched.
That said, projected returns earn the stock a hold recommendation from Sure Dividend at this time. However, we continue to believe that Johnson & Johnson should be a cornerstone of a dividend growth portfolio.
Investors primarily concerned with income safety may find shares of Johnson & Johnson attractive enough to purchase at the current price.
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 ~350 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 2022 High ROIC Stocks List: The top 10 stocks with high returns on invested capital.
- The 2022 High Beta Stocks List: The 100 stocks in the S&P 500 Index with the highest beta.
- The 2022 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