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Why Johnson & Johnson (JNJ) is a Top Dividend Stock for Your Portfolio
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All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Johnson & Johnson in Focus
Based in New Brunswick, Johnson & Johnson (JNJ - Free Report) is in the Medical sector, and so far this year, shares have seen a price change of 11.32%. Currently paying a dividend of $1.06 per share, the company has a dividend yield of 2.42%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.57%, while the S&P 500's yield is 1.35%.
In terms of dividend growth, the company's current annualized dividend of $4.24 is up 6.5% from last year. Johnson & Johnson has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.08%. 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. Right now, Johnson & Johnson's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
JNJ is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $9.65 per share, representing a year-over-year earnings growth rate of 20.17%.
Bottom Line
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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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Why Johnson & Johnson (JNJ) is a Top Dividend Stock for Your Portfolio
All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on 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.
Johnson & Johnson in Focus
Based in New Brunswick, Johnson & Johnson (JNJ - Free Report) is in the Medical sector, and so far this year, shares have seen a price change of 11.32%. Currently paying a dividend of $1.06 per share, the company has a dividend yield of 2.42%. In comparison, the Large Cap Pharmaceuticals industry's yield is 2.57%, while the S&P 500's yield is 1.35%.
In terms of dividend growth, the company's current annualized dividend of $4.24 is up 6.5% from last year. Johnson & Johnson has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.08%. 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. Right now, Johnson & Johnson's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
JNJ is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2021 is $9.65 per share, representing a year-over-year earnings growth rate of 20.17%.
Bottom Line
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. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. 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).