JNJ Dividend Growth Rate, Dividend Payout Ratio, And More
I vividly remember when I first bought JNJ stock and started collecting the JNJ dividend.
It was during the summer of 2007. My Mom had passed away in the Spring of that year. So the timing just seems to stick in my mind.
I was trying to spend more time with my Dad as he transitioned to a new life after 55 years of marriage. And I remember telling him I bought some JNJ stock.
You know the story by now. He’s the Dad that helped me get started dividend investing when I was 10 years old.
So, it’s time for a JNJ stock analysis. And I will take a close look at the JNJ dividend metrics for you. But first, let me continue with my story…
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Why I First Bought JNJ Stock
I liked the JNJ stock dividend. But what I remember was JNJ stock was underperforming at the time.
The stock had been bouncing around the mid $60 per share level for a couple of years. And the JNJ stock price to earnings ratio had dropped into the low teens.
In contrast, the economy and stock market had been going gangbusters. I guess there were other more exciting stocks to buy at the time.
And oh yeah, in 2007 real estate investing was really hot. So no one was giving poor boring old JNJ stock a second thought. So, boring old me jumped into JNJ stock for the first time.
Then Buying More JNJ Stock
Then in 2008, the economy stalled, the real estate bubble burst and the stock market went into a nosedive for a year and a half. I hope to never see anything like that again in my lifetime.
Does anyone remember how ugly 2008 and 2009 were for investors? 2020 has had a few challenges too. But, that’s a story for another day.
During those years, I added to my JNJ stock position on a couple of occasions. And I let the dividends reinvest automatically for about 6 years.
At the time I was hoping that the world would not come to an end. And health care products would still be in demand.
Finally, I believed JNJ stock would eventually recover. And it did.
Collecting The JNJ Dividend, But Haven’t Bought More JNJ Stock In A Long Time
I rarely think about JNJ stock. That’s the great thing about quality dividend growth stocks.
I let the stock and company management do most of the work. While I sit around and collect my dividends.
In fact, I haven’t bought an additional share of JNJ stock since 2013. On the other hand, JNJ stock has grown to be 1 of my top 5 largest dividend stock holdings. And the increasing cash flow from the JNJ stock dividend is quite nice.
Let’s Move On With The JNJ Stock Analysis And Dividend Review
So I figure it’s time to put my fingers to the keyboard. And fully analyze JNJ stock and the JNJ dividend.
I will also check in with the Simply Investing report. The report provides high-quality dividend stock analysis and recommendations.
Why don’t you stick around and join me? JNJ stock is a core holding in my portfolio. Maybe it is in yours too? Or maybe it should be? Read on and you can decide.
That’s enough of my blah, blah, blah. Let’s begin the JNJ stock analysis with a refresher on its business.
JNJ Company Background
First of all, JNJ is the world’s largest and most broadly-based healthcare company. Furthermore, for more than 130 years, they have aimed to keep people well at every age and every stage of life. Finally, they execute their vision through more than 130,000 employees worldwide.
Source: About J&J
The company is structured around 3 business segments.
JNJ has many brands trusted by consumers and healthcare professionals worldwide.
Product categories include:
- Baby care
- Skin care
- Oral care
- Wound care
- Women’s health
Their medical device products cover a broad spectrum for both physicians and patients.
- Interventional Solutions
Finally, with advanced biologic and other treatments, JNJ is investing to change the way diseases are prevented, intercepted, treated, and cured.
In pharmacy, they specialize in the following areas:
- Cardiovascular & Metabolic Disease
- Pulmonary Hypertension
- Infectious Diseases & Vaccines
Source: JNJ Healthcare Products
JNJ Investment And Business Strategy
JNJ’s strategy is implied in its capital allocation plans.
The key points include:
- Invest in internal growth opportunities
- Pursue mergers, acquisitions, and licensing agreements
- Deliver a competitive dividend yield
- Execute share repurchase programs
JNJ Business Risks
JNJ’s business is not without risk. But they have been managing these risks successfully for many years.
I think they are acceptable from my perspective. They include:
- Their massive size making continuing growth a challenge
- Patent losses that increase competition and lower profits
- A product pipeline that needs continual innovation & replenishment
- Product liability and product recalls
JNJ Stock Trades On The NYSE
Finally, Johnson & Johnson stock trades on the New York Stock Exchange (NYSE). It trades under the ticker symbol JNJ.
I have been throwing the term JNJ stock around assuming you knew. And you probably did. But it never hurts to verify.
Facts And Figures About The JNJ Stock Dividend
That completes the business overview portion of the JNJ stock analysis. Let’s move on to the JNJ dividend metrics now.
How Much Is The JNJ Dividend Per Share?
On an annual basis, the JNJ stock dividend payout is $4.04 per share.
What Is The JNJ Stock Dividend Yield?
The dividend payout provides a 2.9% JNJ stock dividend yield at the recent stock price.
The JNJ stock dividend yield isn’t too bad. But regular readers know I prefer buying stocks with dividend yields between 3-5%.
Maybe a high JNJ dividend growth rate can make up for the low dividend yield. We will get to the dividend growth rate in just a moment.
How Often Does Johnson & Johnson Pay Dividends?
The JNJ dividend is paid every 3 months or 4 times per year. Each quarterly dividend payment is $1.01 per share.
In What Months Is The JNJ Stock Dividend Paid?
Dividends are paid in the following months: March, June, September, and December.
What Is The Ex-Dividend Date for JNJ Stock?
For an investor to receive the next JNJ stock dividend payout, they must complete their purchase by the ex-dividend date. JNJ’s ex-dividend date is around the 25th day of each month in which it pays a dividend.
The ex-dividend date is slightly different each quarter. So, it’s best to check JNJ’s dividend history page on its investor relations website for the exact date each quarter.
JNJ Dividend Policy
JNJ management does not communicate specific guidance on future dividend payments as some companies do. However, I do appreciate the fact that paying a “competitive dividend” is mentioned in their capital allocation strategy.
JNJ Stock Dividend History
JNJ has a very long and proud dividend history. This last JNJ dividend increase marks the 58th consecutive year of annual increases.
This qualifies JNJ stock as a Dividend King. Dividend Kings are those rare and special companies who have increased their dividend payouts for at least 50 consecutive years.
So, JNJ has a long history of annual dividend increases. But, what does the dividend growth rate look like? Let’s see…
JNJ Dividend Growth Rate
|1 Year||3 Years||5 Years||7 Years|
The JNJ dividend growth rate is not spectacular. But judging from the chart above, it has certainly been steady and predictable.
The next area in the JNJ stock analysis are its business fundamentals.
Annual Revenue Trend
JNJ crossed the $80 billion revenue mark for the first time in 2018. This is an amazingly large and complex global business. But growth can be narrowed down to a couple of foundational concepts.
First, they can steal market share from competitors with existing products. Second, they can expand share in existing and new markets with line extensions and innovative new products.
New products come from investments in internal research and development. In addition, new products can come from investments in partnerships and acquisitions.
JNJ Dividend Payout Ratio Based On Earnings
JNJ earnings from year to year can be a little choppy. But earnings growth over the long run generally runs in the low to mid-single-digit percentages.
Furthermore, the JNJ dividend payout ratio based on earnings is 66%. A lower payout ratio is usually better when it comes to dividend safety.
Finally, JNJ’s dividend payout ratio is acceptable for such a large, established, and stable company. But, let’s check the dividend payout against cash flow too.
JNJ Dividend Payout Ratio Based On Cash
As shown in the chart below, free cash flow looks very strong.
JNJ generated almost $20 billion of free cash flow during 2019. And the JNJ stock dividend payments only consumed 50% of it.
They used the rest of the free cash flow to pay down debt and execute share buybacks. These are both good uses of extra cash after paying out hefty dividends to shareholders.
JNJ Dividend Growth Rate Forecast
I make a dividend growth forecast for all the dividend stocks that I own. It helps me plan my income. This is especially important for those who pay living expenses with dividends.
My forecast is based on many of the things we have discussed thus far.
- Business model and growth prospects
- Payout ratios
- Dividend history
- Historical dividend growth rates
- Dividend policy (when provided)
For JNJ dividend growth, I think future dividend increases will look much like the recent past. So, I am going to assume a 6% annual JNJ dividend growth rate for future years.
JNJ Financial Position
Moving on with our JNJ stock analysis, let’s look at the company’s financial position.
JNJ really shines in this area. It is 1 of only 2 US-based companies that still have the highest possible credit rating.
This is represented by a triple-A rating from S&P. AAA reflects an investment grade with a minimal credit risk evaluation. See the top line in the chart below.
And in case you were wondering, Microsoft is the other US-based company with a triple-A credit rating.
Then you have ADP who is close to a perfect credit score with a AA rating.
Balance Sheet – Financial Leverage
Looking at JNJ’s balance sheet, debt to equity also looks very reasonable. It checks in at .45 times.
JNJ Dividend Safety
I make a judgment on dividend safety for all of the dividend stocks that I own using the information discussed so far.
JNJ’s rock-solid balance sheet and credit rating reduce dividend risk. It makes the dividend very secure in conjunction with the modest dividend payout ratios and stable business model.
Based on these factors, I judge JNJ’s dividend to be very safe from a reduction in the foreseeable future.
JNJ Stock Valuation
Finally, our JNJ stock analysis would not be complete without assessing stock value.
Let’s judge value in several ways:
- Dividend discount model
- Price to earnings ratio
- Morningstar fair value estimate
- Simply Investing Report
JNJ Dividend Discount Model
The single-stage dividend discount model considers several factors I have discussed thus far. It is a good measure for companies that maintain very stable and predictable dividend growth.
- Current dividend payment – $4.04 per share
- Projected dividend growth – 6.0%
- My desired annual return on investment – 9%
Using these assumptions, the JNJ dividend discount model calculates the fair value at $142 per share.
JNJ Stock Price to Earnings Ratio
The stock price to 2019 earnings sits at about 24 times. This is a fairly high valuation.
But, it is not surprising. High-quality stocks normally come at a premium price.
Morningstar Fair Value
In addition, the investment analysis firm Morningstar believes JNJ stock is fairly valued at $133 per share.
Simply Investing Report
The Simply Investing report makes a value decision based on these criteria:
- Price to earnings ratio 25 or less
- Current dividend yield higher than its historical average
- Price to book ratio at 3 or less
Based on these measures, Simply Investing deems JNJ stock to be undervalued.
In a recent Simply Investing Report, JNJ stock was highlighted as a high-quality and undervalued stock.
JNJ Stock Valuation Summary
The valuation techniques give us a range of value judgements:
- JNJ dividend discount model – $142 per share
- Price to Earnings at 24 times
- Morningstar fair value – $133 per share
- Simply Investing report – Undervalued
Based on my review and judgment, JNJ stock looks fully valued to me. It’s neither a bargain nor extremely overpriced.
JNJ Stock Analysis And Conclusions
Let’s wrap up the JNJ stock analysis with a few concluding thoughts.
Is Johnson And Johnson A Good Dividend Stock?
I love JNJ as a dividend stock and hope to hold it forever. In my opinion, it can be a core holding for any good dividend growth stock portfolio as it is for mine. It’s an ideal first stock for a new investor.
Furthermore, the JNJ stock dividend appears to be very safe. Finally, the dividend will likely grow at a modest mid-single-digit percentage rate into the future.
From my perspective, the combination of a near 3% dividend yield and a 6% annual dividend growth is very powerful.
Why Is Johnson and Johnson A Good Investment?
A “good investment” depends on one’s investment objectives. For me, JNJ is a good investment due to the following reasons:
- Recession resistant business model
- Provides essential goods and services
- Product demand benefits from aging population demographics
- Well managed and focused on creating value for shareholders
- Pays a secure and growing dividend income stream
- Provides the opportunity for long-term share price appreciation
Is Now A Good Time To Buy JNJ Stock?
JNJ stock appears fully valued to slightly overvalued. It is an excellent stock to buy in small increments over time. Also known as dollar-cost averaging.
When dollar-cost averaging, be sure to keep your trading costs low. I trade for free using the powerful Webull app.
Finally, for my purposes, I would like to add to my shares anytime the JNJ dividend yield is at least 3%.
I hope you enjoyed the JNJ stock analysis. If so, here are some additional articles you might like…
Further Reading About Dividend Stocks And Dividend Investing
- Abbvie dividend and stock analysis
- Abbott Lab’s dividend and stock analysis
- Medtronic stock and dividend review
- Why companies pay dividends
My Favorite Dividend Investing Resources
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