Johnsons & Johnsons – a gold standard dividend stock?

Johnson & Johnson (JNJ) key facts

  • One of the world largest MNCs founded in 1886 by three US brothers
  • Develops medical devices, pharmaceuticals, and consumer healthcare goods
  • Ranked No. 36 on the 2021 Fortune 500 by total revenue
  • Traded on NYSE with share prices at $172.93 (29th August 2021) [1]

Financial information

Market CapEVForward P/EEBITDAEV/RevenueEV/EBITDAForward Annual Dividend Yield
$460.79B151,13417.8230,659.05.2415.242.46%

Revenue breakdown

Figure 1. Revenue Breakdown Pie Chart for Johnsons & Johnsons based on data from Investopedia

JNJ has experienced consistent revenue growth for the past 10 years. In particular, the total revenue for the twelve months ending June 30, 2021 was $89.19bn, a 10% rise year over year. [2] This figure can be divided into three segments: Pharmaceuticals, Medical devices, and Consumer healthcare products.

Pharmaceuticals account for the majority of the company’s revenue at over 55%. The contributors to this growth in this segment include the demand for it’s the world’s first single-dose covid vaccine and also other key biological medications.

Medical devices saw a drop in the revenue which accounts for roughly a quarter of the total revenue. This division includes orthopaedics, surgery, care support and vision. This sector has been experiencing challenges due to covid, which could be lack of PPE and NHS workers being converted into treating covid patients. 

Consumer products accounts for 17% of the total sales. The growth could be fuelled by the demand for essential healthcare products at home and its key brand products such as Tylenol. 

J&J Stock price and dividend trend

Figure 2. 10-year Stock Price Chart for Johnsons & Johnsons (JNJ) from Seeking Alpha

Being a member of Dividend King, JNJ has been experiencing dividend growth for 59 years with a current dividend yield (TTM) of 2.39% supported with the consistent growth in stock prices shown in Figure 2.

Figure 3. 10-year Quarterly Dividend History for Johnsons & Johnsons (JNJ) from Seeking Alpha

Looking at Figure 3, you can clearly see the consistent dividend growth year on year for the last 10 years. Currently, the quarterly dividend payout stands at $1.06 and annually dividend payout stands at $4.24. The dividend payout ratio is at 43.84%, which is a very healthy and sustainable figure. 

Strategies

So how did JNJ achieve such consistent dividend payouts to the investors?

During the Covid-19 crisis, JNJ has developed rapid testing for coronavirus as well as the world’s first single dose covid vaccine, which demonstrates its strong innovation. Moreover, JNJ builds value-creating partnerships with biotech, med tech and health tech start-ups and academics to speed up the innovation in disease treatments.

Secondly, JNJ has strong innovation to produce highly differentiated medications.[3] They have employed the most talented and skilled researchers to conduct robust R&D projects to adapt to the rapid changing landscape within the healthcare and pharmaceutical sectors. This will keep them in a competitive or even dominant position in terms of consumer medical products 

Furthermore, JNJ has strengthened their global presence by investing in emerging markets. One example would be that they opened innovation centre in China in 2011 aiming to expand the consumer base by serving them to the enormous population size in Asia Pacific. This would be a very smart strategy since in developing nations, the risk for chronic diseases would be higher than those developed countries. This approach by JNJ would be likely to boost the demand for their products hugely.

My take on the Future

So you might be asking, is JNJ a decent dividend stock to be invested in? My answer is YES. Firstly, JNJ has a consistent track record of its dividend growth over the past 5-10 years and hence it pays decent dividend income for its shareholders. Secondly, JNJ delivers highly demanded essential healthcare products and services such as covid vaccines, surgeries, and band-aids etc. Moreover, JNJ has demonstrated a consistent growth in the revenue and profitability which is a key factor in determining its future trend for dividends payout. 

Bobby Han, London School of Economics and Political Science


[1] Johnsons & Johnsons, Wikipedia, https://en.wikipedia.org/wiki/Johnson_%26_Johnson

[2] Johnsons & Johnsons Revenue 2006-2021, Macrotrends, https://www.macrotrends.net/stocks/charts/JNJ/johnson-johnson/revenue

[3] Johnsons & Johnsons highlights strategies for growth, https://www.jnj.com/media-center/press-releases/johnson-johnson-highlights-strategies-for-growth-through-differentiated-medicines-transformational-pipeline-and-global-product-launches

[4] JNJ, https://seekingalpha.com/symbol/JNJ/income-statement

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