Johnson & Johnson (JNJ) Could Be a Great Choice
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
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 make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Headquartered in New Brunswick, Johnson & Johnson (JNJ) is a Medical stock that has seen a price change of 22.17% so far this year. The world's biggest maker of health care products is paying out a dividend of $1.30 per share at the moment, with a dividend yield of 2.94% compared to the Large Cap Pharmaceuticals industry's yield of 2.11% and the S&P 500's yield of 1.53%.
Looking at dividend growth, the company's current annualized dividend of $5.20 is up 5.9% from last year. Over the last 5 years, Johnson & Johnson has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.37%. Looking ahead, future dividend growth will be dependent on earnings growth and 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 52%, meaning it paid out 52% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for JNJ for this fiscal year. The Zacks Consensus Estimate for 2025 is $10.86 per share, representing a year-over-year earnings growth rate of 8.82%.
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.
High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. 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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Johnson & Johnson (JNJ): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
