Johnson & Johnson Stock: 3 Reasons to Love This Dividend Stock

Johnson and Johnson Stock Dividend StockJohnson & Johnson Stock: 3 Reasons to Love This Dividend Stock

There are very few companies that can be classified as safe investments, but health giant Johnson & Johnson (NYSE:JNJ) fits that mold. Johnson & Johnson stock generates enormous cash flow. In 2014, JNJ stock cash flow was $14.76 billion. On top of that, out of 7,000 publicly traded companies, J&J stock is one of the only three companies that have an “AAA” credit rating from Standard & Poor’s. For dividend investors, you can’t get a much safer place to park your money than this dividend stock.

Johnson & Johnson currently offers a nice yield of 2.84% and is one of the most reliable stocks for dividend investors. It is among an elite class of companies that have increased their dividend payouts every year for at least 25 years. These companies are known as the “dividend aristocrats.” In the case of JNJ stock, it’s increased its dividend yield for 53 straight years.

I suspect that streak will keep going for the foreseeable future. Here’s why:

JNJ Is a Great Business

Chances are you’ve used a Johnson & Johnson product. Since being founded in 1886, J&J has built up an army of brand-name products in the consumer healthcare, pharmaceuticals, and medical devices markets.


If you’ve ever taken “Tylenol,” rinsed your mouth using “Listerine,” polished your mirrors using “Windex,” used a “Band-Aid” to cover a cut, popped a “Benadryl” pill for a cold, or used “Reactine” to fend off allergies, you’ve used a Johnson & Johnson product.

Strong brands build allegiances with consumers; this is what will keep customers purchasing J&J’s products. On top of that, the company can raise prices a bit every year and keep the free cash flowing.

Rock-Solid Dividends

As I mentioned, J&J stock is one you can count on to keep the dividends coming for decades. And you can expect to see a nice increase in those dividends every year, too. Over the past decade, JNJ has increased dividends by about 17% every year. (Source: “Annual Dividends Issued,” Johnson & Johnson, last accessed March 3, 2016.)

The company’s dividend policy is also easily sustainable. JNJ’s dividend payout is about 54% of its profits, which leaves plenty of room for future increases. Investors shouldn’t worry about flat growth in those dividends anytime soon.

Johnson & Johnson also recently approved a $10.0-billion share repurchase program. That accounts for about 3.8% of total shares outstanding and should provide support for the stock price, as well as creating more value for dividend investors. (Source: “Johnson A& Johnson sets $10 billion stock buyback program,” MarketWatch, October 13, 2015.)


If you are looking for a company with a CEO who truly believes in the company, look no further than J&J. Since 1886, the company has only had nine CEOs. The current CEO, Alex Gorsky, has been in with the company for 28 years and has served as CEO for 24 of those years. A company that has a low turnover rate in its management team is generally interested in creating value.

The Bottom Line on JNJ Stock

Dividend investors will be rewarded with steadily growing revenue, increasing dividends, and a management team who cares about the company. For these three reasons, you might want to take a closer look at Johnson & Johnson stock.