Johnson & Johnson (JNJ) raised its quarterly dividend to 70 cents per share ($2.80 per share annualized), representing an increase of 6.1% over the previous payout of 66 cents per share. The new dividend is payable on Jun10 to shareholders of record as of May 27, 2014. The ex-dividend date is May 22, 2014. The announcement of the encouraging move came at the annual meeting of the company’s shareholders.
We believe that the dividend hike not only highlights Johnson & Johnson’s commitment to create value for shareholders but also underlines the healthcare company’s healthy financial condition and confidence in its business going forward. It is evident from past records that Johnson & Johnson has a stable dividend payment history. The latest dividend hike marks the 52nd consecutive year of the company adopting such a stance.
The decision to hike its quarterly dividend comes close on the heels of the company’s impressive performance in the first quarter of 2014. Johnson & Johnson’s first-quarter 2014 earnings (excluding special items) were $1.54 per share, well above the Zacks Consensus Estimate of $1.48 per share and 6.9% above the year-ago earnings of $1.44 per share. This was the 13th successive quarterly outperformance by the company.
Johnson & Johnson’s first quarter sales increased 3.5% year over year to $18.1 billion, marginally above the Zacks Consensus Estimate of $17.9 billion. While operational factors favorably impacted sales by 5.3%, currency fluctuations had a negative impact of 1.8%.
Following the release of better-than-expected first quarter results, the healthcare giant upped its 2014 earnings guidance range by 5 cents to $5.80–$5.90 per share. Following the guidance raise, the Zacks Consensus Estimate has moved up by 4 cents to $5.87 per share.
While we expect the company to continue facing headwinds in the form of pricing pressure, manufacturing issues, and the U.S. healthcare reform, we believe the diversified business model, lack of cyclicality and a strong financial position will continue to help the company pave its way through tough situations.
Johnson & Johnson is a Zacks Rank #2 (Buy) stock. Better-ranked stocks in the medical sector include Regeneron Pharmaceuticals (REGN), ZIOPHARM Oncology (ZIOP) and Vertex Pharmaceuticals Inc. (VRTX). All 3 stocks carry a Zacks Rank #1 (Strong Buy).