Very few companies out there can compete with JNJ in terms of consistency in the increase of and payments of dividends over time. Even through the great recession the company has managed to provide double-digit increases in its dividend. Since 2002, its annual dividend payment has increased by 13% per year, compared to its annual increase in EPS of 11.20% since 2001.
Early this morning, JNJ’s announced that its Board of Directors has declared a cash dividend for the third quarter of 2012 of 61 cents/share on the company’s common stock. The company currently sports a healthy dividend yield of 3.60%. Without doubt, JNJ is a secure long-term stock to hold on to, given that it provides a decent dividend that can be reinvested each quarter to help investors strengthen their position in the stock.
Looking back, JNJ’s stock grew from $48 per share to $65 over the past three years and with its strong foothold in the health care field, sustaining that growth in the coming years should not be an issue.
Furthermore, despite current economic conditions regarding reduced consumer spending, JNJ’s strong foothold in the home brand segment with its OTC drugs, personal care products, and personal hygiene brands will keep its revenue streams sound. The company is currently facing several upcoming patent losses that could reduce its competitiveness in the pharmaceutical market in the coming years, but it is a world leading drug researcher always researching new medicines to be put on the market. Being a leading provider of medical equipment, its equipment segment is expected to grow, factoring in population growth and the number of people joining the middle class in emerging markets such as China, India, Brazil, and Russia.
Looking at its competitors out there, JNJ is faring well. Compared to Abbot Laboratories (ABT) and Novaris AG (NVS), JNJ upholds the highest operating margin at just below 25%. Novaris follows with a margin of 21.5% and Abbot Laboratories trails behind with 20.9%.
Regarding its balance sheet, the company possesses total assets of over $113.6 Billion and has successfully grown these assets over time. In 2009, its assets totaled $94.6 Billion, but in just three years it has managed to gain almost $20 Billion in assets.
Additionally, over the past few weeks the stock has had a few upgrades from analysts. JPMorgan now has it at an “overweight” rating with a price target of $74. (Note: JNJ is currently priced at around $68). Raymond James gives it an “outperform” rating with a price target of $72. Analysts at Jefferies Group upgraded it to a “buy” rating with a price target of $72.
Moreover, a recent Forbes article noted that “Dividend Channel” placed JNJ in its S.A.F.E. category of the top 25 dividend paying stocks in the world.
"JNJ made the "Dividend Channel S.A.F.E. 25″ list because of these qualities: S. Solid return - hefty yield and strong DividendRank characteristics; A. Accelerating amount - consistent dividend increases over time; F. Flawless history - never a missed or lowered dividend; E. Enduring - at least two decades of dividend payments."
Overall, Johnson & Johnson is an opportunity for long-term investors looking for solid dividend payments and growth.