There are many stocks that are beloved by income focused investors, one group of those are the so called Dividend Aristocrats — companies that have raised their payout for at least 25 years in a row. An even more elite group of companies are the Dividend Kings, companies that have raised their dividend for at least 50 years in a row.
There aren’t many of those companies with a five-decade dividend growth track record, but those that exist are worthy of a closer look. In this article, we will take a closer look at healthcare giant Johnson & Johnson (JNJ).
Business Overview
Johnson & Johnson operates in three separate industries: Consumer health products, medical devices, and pharmaceuticals. This business model means that Johnson & Johnson’s revenue stream is well diversified. The company is not too dependent on a positive growth outlook in one of its segments, as good results from one business can balance out weaker results in another segment.
None of the industries Johnson & Johnson operates in are cyclical: The consumer goods segment sells products that people require for their everyday life, the medical devices and pharma products are necessary to keep people healthy.
Source:JNJ presentation, page 1
Johnson & Johnson’s pharmaceuticals segment is the most important one, strong growth in this area over the last couple of years has made it grow to about half of the company’s sales. A good performance of the other business units was still needed for Johnson & Johnson’s stellar long term track record.
The company has increased its sales consistently through the last decades, although the growth momentum has slowed down a bit in the 2010s. This is not surprising though, as a 10% growth rate gets harder to achieve from a higher base.
Currency rates (i.e. a very strong dollar) also adversely impacted Johnson & Johnson’s dollar denominated top line in the last couple of years. Since the dollar has gotten weaker again, this should not hurt the company going forward, though. During the most recent quarter Johnson & Johnson’s top line grew by an impressive 12%, which shows that the company can still grow at a very attractive pace.
Growth Prospects
In the last couple of years the main growth driver was Johnson & Johnson’s pharmaceuticals division, and that will likely remain true going forward as well.
Source:JNJ presentation, page 12
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