Johnson & Johnson Is a Rock-Solid Dividend Stock
To income investors, Johnson & Johnson (NYSE:JNJ) stock was one of the best names to own for the past century. The company was founded more than 130 years ago and had provided investors with rock-solid dividends for decades. The big question now, of course, is whether the century-old company is still worth considering for income investors in the 21st century. So in this article, we are going to take a look at Johnson & Johnson’s dividend history, current dividend policy, growth prospects, and everything you need to know about what the future could hold for the healthcare giant.
Johnson & Johnson was founded in 1886 by three Johnson brothers to create a line of ready-to-use surgical dressings with just a handful of employees. Two years later, the company decided to introduce a number of groundbreaking consumer products, including the first ever commercial first-aid kits.
From then on, Johnson & Johnson expanded quickly. It introduced many new product segments and incorporated operating companies outside the U.S. The company completed its initial public offering (IPO) with a listing on the New York Stock Exchange on September 24, 1944. At that point, Johnson & Johnson already had a lineup of more than 1,200 products.
Today, Johnson & Johnson is a healthcare behemoth, commanding over $300.0 billion of market cap. The company employs a workforce of over 126,000. It has more than 250 operating companies spread across 60 countries selling products throughout the world. Johnson & Johnson’s products are used by over one billion people every day.
Source: StockCharts.com
As Johnson & Johnson grew tremendously in size, the company became a lot more valuable, so it’s no surprise that long-term investors of JNJ stock have been handsomely rewarded. Still, just how much would an investor have made if they held on to their shares of Johnson & Johnson for decades?
Well, let’s take a look at a simple example. Suppose an investor bought 100 shares of JNJ stock on the first trading day of 1972. That investment would have cost $9,775. If the investor held those 100 shares to today, the value of that investment would be $598,464. That’s a return of 6,022.39%.
Source: “Investment Calculator,” Johnson & Johnson, last accessed April 7, 2017.
Note that the over 60-fold return of that investment represents just the appreciation in Johnson & Johnson market value. There is another way through which JNJ stock has helped investors generate impressive returns—dividends. Here is everything you need to know about the company’s dividend.
- JNJ Dividend Stock History
- JNJ Stock Dividend Per Share
- Johnson & Johnson’s Current Dividend Policy
- When is Johnson & Johnson’s Ex-Dividend Date?
- Will Johnson & Jonson Raise Its Dividend?
- What to Expect from Johnson & Johnson in 2017
- The Real Strength of Johnson & Johnson
- Johnson & Johnson Stock Dividend Reinvestment Plan (DRIP)
- Johnson & Johnson Stock Split History
- Will Johnson & Johnson Stock Split in 2017?
- Final Thoughts On JNJ Stock Dividend
JNJ Dividend Data
| Dividend Yield | Annualized Payout | Payout Ratio | Dividend Growth |
| 2.56% | 3.20 | 46.8% | 54 Years |
#1. JNJ Dividend Stock History
As income investors, one of the first things we look at when considering a dividend paying stock is its yield. Right now, Johnson & Johnson stock has an annual dividend yield of 2.56%, which is not bad given that the average yield of S&P 500 companies is at 1.94%. But it’s not great either, since there are plenty of companies with much higher yields.
However, what makes Johnson & Johnson stand out as a dividend stock is its ability to raise its payout. You see, as the company grew its business, it decided to return some of its growing profits to investors. As a matter of fact, Johnson & Johnson has increased its dividend every year for 54 consecutive years. (Source: “Dividend History,” Johnson & Johnson, last accessed April 7, 2017.)
Being a dividend king is an amazing achievement for Johnson & Johnson. There are many companies that have grown their business over the years, but not all of them were willing to pay out their growing profits to shareholders. As a matter of fact, among the thousands of companies trading in the U.S. stock market, there are only 19 dividend kings.If you have been following blue-chip dividend stocks, you will likely have heard of the term “dividend aristocrats,” which are companies that have raised their dividends for 25 consecutive years. With 54 years of nonstop dividend increases, Johnson & Johnson is much more than a dividend aristocrat. In fact, it is a “dividend king,” a title reserved for companies with at least 50 years of dividend increases.
Source: “Dividend History,” Johnson & Johnson, last accessed April 7, 2017.
More than five decades of consecutive dividend increases is a testament to Johnson & Johnson’s durable competitive advantage. Dividends come from a company’s earnings. A company may be making good profits today, but once competitors enter the market, they could lead to erosion of the company’s market power. So being able to generate recurring business and growing it for decades is something truly special.
On top of that, Johnson & Johnson also has to deal with the macroeconomic environment. Over the past 54 years, the world economy had plenty of ups and downs. But through thick and thin, JNJ stock has always managed to raise its payout to income investors.
Now, since the company is already established, you might think that there wouldn’t be much dividend growth. However, that hasn’t been the case. The table below shows Johnson & Johnson’s dividend history for the past five years. As you can see, with five dividend increases, JNJ stock’s quarterly dividend rate has been raised 40% from $0.57 per share to $0.80 per share. That translates to a compound annual growth rate of more than seven percent.
| Declaration Date | Ex-Dividend Date | Record Date | Payment Date | Amount |
| Jan. 3, 2017 | Feb. 24, 2017 | Feb. 28, 2017 | Mar. 14, 2017 | $0.80 |
| Oct. 20, 2016 | Nov. 18, 2016 | Nov. 22, 2016 | Dec. 6, 2016 | $0.80 |
| Jul. 18, 2016 | Aug. 19, 2016 | Aug. 23, 2016 | Sep. 6, 2016 | $0.80 |
| Apr. 28, 2016 | May. 20, 2016 | May. 24, 2016 | Jun. 7, 2016 | $0.80 |
| Jan. 4, 2016 | Feb. 19, 2016 | Feb. 23, 2016 | Mar. 8, 2016 | $0.75 |
| Oct. 22, 2015 | Nov. 20, 2015 | Nov. 24, 2015 | Dec. 8, 2015 | $0.75 |
| Jul. 20, 2015 | Aug. 21, 2015 | Aug. 25, 2015 | Sep. 8, 2015 | $0.75 |
| Apr. 23, 2015 | May. 21, 2015 | May. 26, 2015 | Jun. 9, 2015 | $0.75 |
| Jan. 5, 2015 | Feb. 20, 2015 | Feb. 24, 2015 | Mar. 10, 2015 | $0.70 |
| Oct. 16, 2014 | Nov. 21, 2014 | Nov. 25, 2014 | Dec. 9, 2014 | $0.70 |
| Jul. 21, 2014 | Aug. 22, 2014 | Aug. 26, 2014 | Sep. 9, 2014 | $0.70 |
| Apr. 24, 2014 | May. 22, 2014 | May. 27, 2014 | Jun. 10, 2014 | $0.70 |
| Jan. 2, 2014 | Feb. 21, 2014 | Feb. 25, 2014 | Mar. 11, 2014 | $0.66 |
| Oct. 17, 2013 | Nov. 22, 2013 | Nov. 26, 2013 | Dec. 10, 2013 | $0.66 |
| Jul. 15, 2013 | Aug. 23, 2013 | Aug. 27, 2013 | Sep. 10, 2013 | $0.66 |
| Apr. 25, 2013 | May. 23, 2013 | May. 28, 2013 | Jun. 11, 2013 | $0.66 |
| Jan. 2, 2013 | Feb. 22, 2013 | Feb. 26, 2013 | Mar. 12, 2013 | $0.61 |
| Oct. 17, 2012 | Nov. 23, 2012 | Nov. 27, 2012 | Dec. 11, 2012 | $0.61 |
| Jul. 16, 2012 | Aug. 24, 2012 | Aug. 28, 2012 | Sep. 11, 2012 | $0.61 |
| Apr. 26, 2012 | May. 24, 2012 | May. 29, 2012 | Jun. 12, 2012 | $0.61 |
| Jan. 3, 2012 | Feb. 24, 2012 | Feb. 28, 2012 | Mar. 13, 2012 | $0.57 |
| Oct. 21, 2011 | Nov. 25, 2011 | Nov. 29, 2011 | Dec. 13, 2011 | $0.57 |
| Jul. 18, 2011 | Aug. 26, 2011 | Aug. 30, 2011 | Sep. 13, 2011 | $0.57 |
| Apr. 28, 2011 | May. 26, 2011 | May. 31, 2011 | Jun. 14, 2011 | $0.57 |
#3. Johnson & Johnson’s Current Dividend Policy
To see how much Johnson & Johnson pays dividends today, let’s take a look at its current dividend policy.
Results of Johnson & Johnson’s most recent review of its dividend policy was announced on April 28, 2016. The company’s board of directors declared a quarterly dividend rate of $0.80 per share, representing a 6.7% increase from its previous quarterly payout of $0.75 per share. (Source: “Johnson & Johnson Announces Dividend Increase of 6.7%,” Johnson & Johnson, April 28, 2016.)
A quarterly dividend rate of $0.80 per share translates to an annual payout of $3.20 per share. At today’s price, that gives JNJ stock an annual dividend yield of 2.56%.
#4. When Is Johnson & Johnson’s Ex-Dividend Date?
In dividend investing, it’s important to take note of a stock’s ex-dividend date. This is the date before which an investor needs to purchase a stock in order to collect a company’s next dividend payment. If the investor buys the stock on or after the ex-dividend date, they would not be entitled to the next dividend payment. Rather, the dividend will be paid to the seller.
Many financial web sites has information on a stock’s ex-dividend date. When a company declares a dividend, it specifies a record date. The ex-dividend date is usually set to be two days before the record date.
In Johnson & Johnson stock’s case, the company’s most recent dividend announcement set February 28, 2017 as the record date. Therefore, the ex-dividend date was two business days earlier, on February 24. The $0.80 per share of quarter dividend was paid to shareholders on March 14. (Source: “Johnson & Johnson Announces Quarterly Dividend for First Quarter 2017,” Johnson & Johnson, January 3, 2017.)
Johnson & Johnson has yet to declare its next dividend. Note that the company has made four dividend payments at the current dividend rate. If the past is any indication, this means it is time for Johnson & Johnson to review its dividend policy again.
#5. Will Johnson & Johnson Raise Its Dividend?
As we have all heard numerous times, past performance does not guarantee future results. And since the stock market is forward-looking, let’s go over Johnson & Johnson’s financials and see if another dividend increase is on the way.
According to Johnson & Johnson’s most recent earnings report, things were pretty solid for the healthcare giant. In 2016, the company’s worldwide sales increased 2.6% from the prior year to $71.9 billion. Because Johnson & Johnson generates about half of its sales from overseas, the strong U.S. dollar resulted in a negative impact of currency of 1.3%. Excluding exchange rate fluctuations, operational results increased 3.9%. Excluding other items that are believed to be nonrecurring—acquisitions, divestitures, hepatitis C, Venezuela, and additional shipping days in 2015—Johnson & Johnson’s worldwide operational sales increased 7.4% last year. (Source: “Johnson & Johnson Reports 2016 Fourth-Quarter Results,” Johnson & Johnson, January 24, 2017.)
Top-line growth translated to the bottom line. Johnson & Johnson’s adjusted net earnings came in at $18.8 billion for full year 2016. That’s $6.73 per diluted share, representing an 8.5% increase from the prior year.
“The strong adjusted sales and EPS growth was driven by the impressive performance of our Pharmaceutical business and continued momentum in our Medical Device business and share gains while improving profitability in our Consumer business,” said Johnson & Johnson’s chairman and chief executive officer, Alex Gorsky. “Looking forward to 2017, we expect to continue driving sustainable, long-term growth through the new products, science and innovation that our talented colleagues and partners of Johnson & Johnson are advancing to positively impact human health,” he continued. (Source: Ibid.)
#6. What to Expect from Johnson & Johnson in 2017
Going forward, growth is expected to continue at the New Brunswick, New Jersey-based healthcare company. For full-year 2017, Johnson & Johnson expects to generate sales of between $74.1 billion and $74.8 billion, reflecting expected operational growth of between four and five percent. Adjusted earnings are expected to be in the range of $6.93 to $7.08 per share, which would represent expected operational growth of between 4.8% and seven percent.
Therefore, on the growth front, the company seems to be well-positioned for another dividend increase. Moreover, despite all the dividend hikes over the years, the company was not really paying out all that much. Last year, Johnson & Johnson paid a total of $3.15 of dividends per share while generating $6.73 in adjusted earnings per share, so it was paying out less than 47% of what it earned. A low payout ratio like this leaves a sizable margin of safety and gives potential for future dividend hikes.
So, what’s the answer to the question “Will Johnson & Johnson raise its dividend?” Well, given the company’s strong financials, current payout ratio, and forecasted earnings per share, I expect Johnson & Johnson to announce a mid- to high-single-digit increase to its quarterly dividend rate when the company reviews its dividend policy later in April.
#7. The Real Strength of Johnson & Johnson
All the dividend increases and stock price appreciation can be quantified. But the real strength of Johnson & Johnson might be even more impressive than what those numbers suggest.
Dividends are sticky. When a company announces a dividend rate, although there is no guarantee, the implication is that it will keep paying this much going forward. That’s because in the stock market, few things disappoint investors more than a dividend cut.
Therefore, by raising its payout every single year, Johnson & Johnson shows it is confident that its business is not just booming, but can stay prosperous indefinitely. But where does this level of confidence come from?
The answer lies in Johnson & Johnson’s products. The company operates through three segments: Pharmaceutical, Medical Device, and Consumer. It has well-established market positions in each of these segments.
For instance, in the Pharmaceutical business, Johnson & Johnson markets more than 100 drugs. It has 46 drugs that each generates over $50.0 million in annual sales, 34 drugs over $100.0 million, and 11 drugs over $1.0 billion. In the Consumer business, the company’s baby care products like “Johnson’s Baby,” wound care products like “Band-Aid,” and over-the-counter products like “Tylenol” have become household names.
Johnson & Johnson’s brand name, economies of scale, and industry expertise means it would be extremely difficult if someone were to challenge its market position. Moreover, JNJ’s products are things that people need rather than want, which means that even during an economic recession, Johnson & Johnson’s products would continue to sell well. In addition, the company is also well-diversified geographically, with around half of its sales coming from outside the U.S. It’s unlikely that a regional downturn would do too much damage to the company’s whole business. In fact, the company has grown its adjusted earnings for 32 consecutive years. That’s why Johnson & Johnson can provide recession-proof dividends to shareholders.
#8. Johnson & Johnson Stock Dividend Reinvestment Plan (DRIP)
We know that JNJ stock has done a wonderful job at returning value to investors in the form of dividends. But what if an investor doesn’t need to use the cash dividends immediately? Well fortunately, Johnson & Johnson is a company that offers a dividend reinvestment plan, or DRIP.
To put it simply, a company that offers a DRIP allows shareholders to reinvest their cash dividends by purchasing additional shares of the company. Once an investor enrolls in a DRIP, they no longer receive the cash dividends in their brokerage accounts. Instead, the dividends are automatically used to buy more shares of the company, usually on the dividend payment date.
One of the most obvious benefits of using a DRIP is the saving of commissions. If an investor were to use the cash dividends to purchase additional shares manually through their brokerage account, they would be paying a commission for every transaction. Those commissions can quickly add up as each dividend need to be reinvested manually.
Johnson & Johnson’s DRIP allows existing shareholders to reinvest all or a portion of dividends into additional shares of JNJ stock without any fees or commissions. Moreover, after enrolling in the program, investors can also make additional cash purchases of JNJ stock of up to $50,000 per year.
Johnson & Johnson’s dividend reinvestment plan is administered by Computershare. (Source: “Dividend Reinvestment Program,” Johnson & Johnson, last accessed April 7, 2017.)
Other than the saving of fees and commission, a DRIP can also unleash one of the most powerful forces in the universe: the power of compounding.
Remember the earlier example of how an investor with 100 shares of JNJ in 1972 would have their stake grown to nearly $600,000 today? Well, that example did not include reinvesting the company’s dividends. If the investor enrolled in Johnson & Johnson’s DRIP and reinvested all the dividends they received, the value of their initial investment—100 shares of JNJ stock, valued at $9,775 in 1972—would have grown to $978,307.27 by April 4, 2017. That’s a return of 9,908.26%!
Source: “Investment Calculator,” Johnson & Johnson, last accessed April 7, 2017.
#9. Johnson & Johnson Stock Split History
Now, let’s go back to the original example (without dividend reinvestment) of how an investor could turn 100 shares of JNJ stock in 1972 to $598,464 today. Now, some readers may be wondering, since the current price of Johnson & Johnson stock is at around $125.00 apiece, how can 100 shares be worth close to $600,000?
Well, that’s because 100 shares of Johnson & Johnson stock in 1972 have become a lot more than 100 shares of JNJ today thanks to stock splits.
You see, when a company’s stock price rises above a certain level, it may have an incentive to split its shares. The idea is that when a company’s stock price is much higher than its peers, it could make the company look more expensive, even though stock price alone does not determine its valuation. Moreover, when a small investor buys shares, there might be a minimum trading parcel. When a company split its stock, it increases the number of shares outstanding. And since there is no change to the underlying value of the company, the stock price will be reduced, making the stock look more affordable.
Johnson & Johnson stock has climbed steadily for decades, so it’s no surprise that the company had split its shares many times. Since the company became public in 1944, it has increased its shares outstanding on 12 different occasions. As the table below shows, there were five stock dividends and seven stock splits. Stock dividends have a similar effect as stock splits, as they increase a company’s shares outstanding and reduce the stock price.
| Record Date | Payout Date | Action |
| May 22, 2001 | June 12, 2001 | 2-for-1 split |
| May 21, 1996 | June 11, 1996 | 2-for-1 split |
| May 19, 1992 | June 9, 1992 | 2-for-1 split |
| April 26, 1989 | May 10, 1989 | 2-for-1 split |
| April 21, 1981 | May 18, 1981 | 3-for-1 split |
| April 17, 1970 | May 15, 1970 | 3-for-1 split |
| May 22, 1967 | June 19, 1967 | 200% stock dividend |
| December 19, 1958 | January 9, 1959 | 2 1/2-for-1 split |
| February 23, 1951 | March 20, 1951 | 5% stock dividend |
| October 25, 1949 | November 15, 1949 | 5% stock dividend |
| October 25, 1948 | November 15, 1948 | 5% stock dividend |
| April 8, 1947 | May 5, 1947 | 100% stock dividend |
So if an investor bought 100 shares of Johnson & Johnson in 1972, their stake would have gone through five stock splits—a three-for-one split in 1981 and four two-for-one splits in 1989, 1992, 1996, and 2001. That means one share of Johnson & Johnson in 1972 would have turned into (1 x 3 x 2 x 2 x 2 x 2) = 48 shares today. The investor’s initial 100 shares would become 4,800 shares of JNJ stock, with is worth around $600,000 at today’s price.
#10. Will Johnson & Johnson Stock Split in 2017?
Despite being in the market for over seven decades, Johnson & Johnson stock has still got a large following. In the past five years, shares of JNJ stock has nearly doubled. And at $125.00 apiece, the company’s stock price is now higher than some of its peers in the pharmaceutical industry.
In the past, Johnson & Johnson liked to split its shares when the prices rose above $100.00. Since 2014, JNJ stock has been trading at more than $100.00 apiece for the most part, but the company has yet to conduct another stock split. Management seems to be more focused on growing the company’s underlying business rather than JNJ’s stock price, which is a good thing. Moreover, in recent years, there has been a decline in the number of stock splits in the overall market, even though share prices have been rising. Therefore, despite that JNJ stock has risen above its critical $100.00 mark, the company could just let its shares keep rising in 2017.
#11. Final Thoughts on JNJ Stock Dividend
At the end of the day, it might still seem that JNJ stock’s 2.56% dividend yield is nothing to brag about. However, note that a company’s dividend yield moves inversely to its stock price. Very often, the reason why a company can have an ultra-high yield is its subdued stock price. And the reason behind that is usually that investors don’t believe the dividend is sustainable. That’s why even though there are many stocks with very attractive dividend yields, they would not be good investments for long-term dividend investors.
Dividend stability and durability is where Johnson & Johnson truly shines. The company runs a recession-proof business, is well-diversified, and has demonstrated significant financial strength over the decades. In fact, it is one of only two U.S. companies with an AAA credit rating from Standard & Poor’s. For investors looking for an income stream that can continue well into the future, JNJ stock is definitely worth taking a look.