E Johnson & Johnson: Quality Dividend Aristocrat For Long-Term Dividend Growth

Volatility has gripped the markets in recent weeks, with larger swings in the S&P 500. Amid this greater volatility, investors may be looking for ways to reduce volatility in their own portfolios. One way to do this is by investing in high-quality dividend growth stocks, such as the Dividend Aristocrats.

Healthcare giant Johnson & Johnson (JNJ) is among the highest-quality Dividend Aristocrats that investors can buy and hold for years. The company dominates the healthcare industry and has rewarded investors with over 50 years of annual dividend increases.

J&J stock has a reasonable valuation, a solid 2.5% dividend yield, a long runway of dividend growth up ahead, and low stock volatility. This makes J&J a top dividend growth stock.

World-Class Business Fuels Dividend Growth

J&J has one of the longest streaks of annual dividend increases in the entire S&P 500 Index. The biggest reason for this is the company’s durable competitive advantage that has developed over the years, by dominating the healthcare industry. Whereas many healthcare companies focus on one specific area of the healthcare industry, such as pharmaceuticals, consumer health products or medical devices, J&J is diversified across all three. And, it has leadership positions in each category.

The end result is that J&J is an industry giant, with a highly profitable business model that has allowed the company to return excess cash to shareholders. With 2020 revenue of $82.58 billion and net income of $14.71 billion, J&J had a net profit margin of 17.8%. This is a very health profit margin and is representative of strong profitability ratios that are crucial to a company’s ability to grow its dividend over the long run.

Another key factor behind J&J’s long history of dividend increases is the company’s recession-resistant business model. As a diversified healthcare company, consumers rely on J&J’s products every year. People will always need their pharmaceuticals, health products and medical devices, even if the economy is in recession. This gives J&J a certain level of demand regardless of the economic environment. This has allowed J&J to remain highly profitable, and continue to grow its dividend each year, even when the U.S. has entered recessions.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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William K. 1 month ago Member's comment

This explains that an adequately spread product line can be a good business plan.