Have you been keeping an eye on Johnson & Johnson’s (NYSE:JNJ) upcoming dividend of $0.9 per share payable on the 12 June 2018? Then you only have 3 days left before the stock starts trading ex-dividend on the 25 May 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Johnson & Johnson’s latest financial data to analyse its dividend attributes. View our latest analysis for Johnson & Johnson
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Is it able to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Johnson & Johnson fit our criteria?
JNJ currently pays out twice what it is earning, according to its trailing twelve-month data, meaning that the dividend is predominantly funded by retained earnings. In the near future, analysts are predicting a more sensible payout ratio of 44.72%, leading to a dividend yield of around 3.12%. Furthermore, EPS should increase to $6.85, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. In the case of JNJ it has increased its DPS from $1.84 to $3.6 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock. Relative to peers, Johnson & Johnson produces a yield of 2.90%, which is on the low-side for Pharmaceuticals stocks.
Taking into account the dividend metrics, Johnson & Johnson ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for JNJ’s future growth? Take a look at our free research report of analyst consensus for JNJ’s outlook.
- Valuation: What is JNJ worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether JNJ is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.