Why Johnson & Johnson (JNJ) is a Great Dividend Stock Right Now
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Johnson & Johnson (JNJ) have w...
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Johnson & Johnson in Focus
Based in New Brunswick, Johnson & Johnson (JNJ) is in the Medical sector, and so far this year, shares have seen a price change of 9.88%. The world's biggest maker of health care products is currently shelling out a dividend of $1.06 per share, with a dividend yield of 2.45%. This compares to the Large Cap Pharmaceuticals industry's yield of 2.33% and the S&P 500's yield of 1.35%.
In terms of dividend growth, the company's current annualized dividend of $4.24 is up 6.5% from last year. In the past five-year period, Johnson & Johnson has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.08%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Johnson & Johnson's current payout ratio is 46%. This means it paid out 46% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for JNJ for this fiscal year. The Zacks Consensus Estimate for 2021 is $9.65 per share, with earnings expected to increase 20.17% from the year ago period.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, JNJ is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).
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