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Johnson & Johnson: A Dividend King With Long-Lasting Growth Potential

Date: Thursday, June 6, 2019 8:13 PM EST

Healthcare giant Johnson & Johnson (JNJ) is an industry-leading company with significant competitive advantages, that have fueled its impressive growth over the past several decades. Johnson & Johnson is a member of the Dividend Kings, a group of just 26 companies that have raised their dividends for at least 50 years in a row.

Johnson & Johnson has a long history of dividend growth and a high yield of nearly 3%. These qualities are the reasons Johnson & Johnson stock is a top pick for long-term dividend growth.

Recent Events And Future Growth

Johnson & Johnson will remain a dividend growth company because of its strong business model. The company is diversified across medical devices, pharmaceuticals, and consumer health products. It has a leading market share in each category and generates billions of sales from all segments.

Overall, Johnson & Johnson grew organic sales by 6% in 2018, while adjusted EPS increased 12% for the year. The company has continued to generate growth in 2019. In the 2019 first quarter, the company grew EPS by 2%, and beat analyst expectations for the quarter.

The company’s pharmaceutical products will represent its major growth catalyst in the years ahead. Pharmaceutical segment revenue increased 12% in 2018, thanks to 25% growth in oncology revenue and 10% growth in immunology. These represent the two growth areas of 2019 and beyond. Pharmaceutical revenue grew 4.1% to $10.2 billion in the most recent quarter, on the strength of 7% Immunology growth and 9% oncology growth.

Continued growth in the pharmaceutical segment, along with steady increases in medical device and consumer product sales, will allow Johnson & Johnson to continue growing earnings. In turn, this will provide the company with the ability to continue raising its dividend each year, as it has done for over five decades.

A Premier Dividend Growth Stock

Johnson & Johnson reiterated its revenue guidance of $80.4 billion to $81.2 billion but tightened its earnings-per-share expectations to range of $8.53 to $8.63. The midpoint for earnings-per-share guidance remains unchanged at $8.58. Still, this easily covers the company’s dividend payments. With a dividend payout ratio of 42% for 2019, the dividend should continue to be increased each year for many years to come.

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