JNJ 151.04 (+1.21%)
US4781601046Drug ManufacturersDrug Manufacturers - General

Last update on 2024-06-25

Johnson & Johnson (JNJ) - Dividend Analysis (Final Score: 6/8)

Detailed analysis of Johnson & Johnson's (JNJ) dividend policy using an 8-criteria system, with a final score of 6/8, highlighting stability and growth potential.

Knowledge hint:
The dividend analysis assesses the performance and stability of Johnson & Johnson (JNJ) dividend policy using a 8-criteria scoring system.
Learn more...

Short Analysis - Dividend Score: 6

We're running Johnson & Johnson (JNJ) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Criteria
Dividend Yield Higher than the Industry Average?
0
Average annual Growth Rate higher than 5% in the last 20 years?
1
Average annual Payout Ratio lower than 65% in the last 20 years?
0
Dividends Well Covered by Earnings?
1
Dividends Well Covered by Cash Flow?
1
Stable Dividends Since the Company Began Paying Dividends?
1
Dividends Paid for Over 25 Years?
1
Reliable Stock Repurchases Over the Past 20 Years?
1

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Criterion 1: Dividend yield

Historical Dividend Yield of Johnson & Johnson (JNJ) in comparison to the industry average

Johnson & Johnson (JNJ) has a dividend yield of 2.9986%, which is slightly below the industry average of 3.29%. The company’s dividend yield has fluctuated over the last 20 years ranging from 1.7266% in 2004 to 3.4309% in 2011. Compared to the industry which had extreme fluctuations with a peak of 162.86% in 2020 and a fall to 2.55% in 2022, JNJ's more stable dividend yield demonstrates a consistent performance. Given that dividend yield is firm's annual dividend payments divided by its market price per share—indicative of the return to investment from dividends alone—the more stable yield of JNJ exemplifies reliability, although it's currently underperforming slightly in terms of industry average. Additionally, JNJ's stock prices have broadly increased from $51.66 in 2003 to $156.74 in 2023, and its dividend per share has also meaning enough potential for long-term investors.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate (DGR) measures the annualized percentage rate of growth that a particular stock's dividend undergoes over a period. It indicates how fast a company is increasing its dividends. A higher DGR is crucial for income investors as it suggests growing dividend income over time, which can help offset inflation.

Dividend Growth Rate of Johnson & Johnson (JNJ)

Evaluating the dividend per share ratio for Johnson & Johnson (JNJ) over the last 20 years, we observe the following annual figures (with slight fluctuations): Starting from approximately 16.35 in 2003, the ratio sees variances such as 12.68 in 2004, 14.11 in 2007, and notable moments with 10.80 in 2007, the dividend per share ratio presents significant variability, appearing to decrease over time. A consistent upward trend isn't immediately recognizable when inspecting ratios year by year. The average dividend ratio over 20 years standing at approximately 19.3 doesn't overwhelmingly support an annual growth rate of over 5%. However, variations need to be contextualized with overall corporate performance and economic conditions. To accurately state whether JNJ has sustained a dividend growth rate above 5% annually, more explicit compounded growth assessments are necessary (which include starting and ending payout figures over the designated period), but the current ratio trends appear signally stable albeit not reflecting definitive considerable growth year-to-year consistently for claiming high growth exceeding the 5% threshold.

Average annual Payout Ratio lower than 65% in the last 20 years?

A sustainable average payout ratio is critical for dividend health, ideally below 65%.

Dividends Payout Ratio of Johnson & Johnson (JNJ)

The Average Payout Ratio being 81.58% over the last 20 years for Johnson & Johnson (JNJ) indicates a concerning trend. Typically, a sustainable payout ratio should ideally stay below 65% to ensure the company isn't overextending itself. The data shows substantial deviations, particularly in 2017 with a payout ratio spike to 701.16%. It reflects the company's occasional struggle to balance dividend payments with earnings, suggesting potential financial strain in certain years. Such high payout ratios can be a signal that future dividend growth might be unsustainable, especially in years with lower earnings.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that the company generates enough profit to pay out its dividends without compromising financial stability. This is crucial for ensuring the sustainability of dividend payouts in the long run.

Historical coverage of Dividends by Earnings of Johnson & Johnson (JNJ)

Over the years, Johnson & Johnson (JNJ) has demonstrated a consistent pattern of earnings per share (EPS) comfortably covering its dividend payouts, barring a few anomalies. For example, in 2017, the EPS coverage ratio spiked to an unusual 7.01, indicative of a likely one-off gain that significantly inflated earnings. Generally, the coverage ratio has hovered between 0.4 and 0.7, signifying stability, except in 2017. The most recent data from 2023 shows a coverage ratio of 0.34, which, although lower, still indicates that earnings comfortably cover dividends. This trend is generally favorable, showing that JNJ’s dividends are well-supported by its earnings, underlining the company’s robust financial health.

Dividends Well Covered by Cash Flow?

Dividends Well Covered by Cash Flow

Historical coverage of Dividends by Cashflow of Johnson & Johnson (JNJ)

Johnson & Johnson's ability to cover dividends with free cash flow is measured by calculating the ratio of the dividend payout to the free cash flow. This ratio is a critical metric because it offers insight into whether the company generates sufficient cash to sustain its dividend payments, without jeopardizing its financial stability or growth potential. Given the data: From 2003 to 2023, the free cash flow has generally increased from $8.33 billion to $17.78 billion. Meanwhile, the dividend payout has also steadily risen from $2.74 billion to $11.77 billion over the same period. The dividend coverage ratio was 32.95% in 2003 and increased to 66.20% in 2023, which still indicates dividends are amply covered by cash flow. This trend is favorable since a ratio under 100% means the company is generating more than enough cash to cover its dividend payouts, leaving room for reinvestment or other financial priorities.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is key for income-seeking investors.

Historical Dividends per Share of Johnson & Johnson (JNJ)

Over the past 20 years, Johnson & Johnson (JNJ) has shown admirable stability in its dividend payments, increasing from $0.925 per share in 2003 to $4.7 per share in 2023. This consistent growth, devoid of any year where the dividend dropped by more than 20%, highlights JNJ's robust dividend policy. Continuous upward trends in dividend payouts indicate strong financial health and commitment to returning value to shareholders, which is highly favorable for income-seeking investors.

Dividends Paid for Over 25 Years?

Dividends paid for over 25 years demonstrate stability and reliability, indicating confidence in financial health.

Historical Dividends per Share of Johnson & Johnson (JNJ)

Johnson & Johnson has consistently paid and increased its dividends for over 25 years, starting from $0.485 per share in 1998 to $4.70 per share in 2023. This steady growth showcases the company's strong financial stability and commitment to returning value to shareholders. The upward trend in dividends is a clear positive indicator, reflecting J&J’s profitability and robust cash flows. Such long-term consistency in dividend payouts is a hallmark of blue-chip companies, making J&J a reliable choice for income-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Explain the criterion for Johnson & Johnson (JNJ) and why it is important to consider

Historical Number of Shares of Johnson & Johnson (JNJ)

To assess the reliability of a company’s stock repurchases over a period of 20 years, particularly examining the number of shares outstanding each year. This criterion is important because it gives an indication of a company’s commitment to returning value to shareholders through repurchases, which can signal confidence in the company's future prospects and earnings stability. It also helps to understand whether the repurchases are done opportunistically or with consistency.


Obligatory risk notice

We would like to point out that the contents of this website are for general information purposes only and do not constitute recommendations for the purchase or sale of specific financial instruments, and therefore do not constitute investment advice. In particular, marketstorylabs.com and its creators cannot assess the extent to which information / recommendations made on the pages correspond to your investment objectives, your risk tolerance and your ability to bear losses. Therefore, if you make any investment decisions based on information on the site, you do so solely on your own responsibility and at your own risk. This in turn means that neither marketstorylabs.com nor its creators are liable for any losses incurred as a result of investment decisions based on the information on the marketstorylabs.com website or other media used.