Johnson & Johnson Offers Steady Stock, Dividend Gains


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Johnson & Johnson ( JNJ ) offers the best of both worlds for investors: a rising stock price and regular dividend increases.

The maker of everything from baby shampoo to Tylenol and hip joints has increased its dividend for 51 straight years.

IBD calculates a three- to five-year dividend growth rate of 8% for J&J. The latest increase was announced in April, an 8% rise to 66 cents a share, or $2.64 annually. The annualized yield is 2.9% at the current share price, above the S&P 500 average of 2.4%.

After going mostly sideways for years, J&J's stock has taken off this year, climbing 28% vs. the S&P's approximately 20% gain. The stock is currently hitting up against resistance at its 50-day line as it tries to shape the right side of a base-on-base pattern.

The company's turnaround began after Alex Gorsky took over as CEO last year, replacing Bill Weldon, whose tenure was marred by product recalls and lawsuits over some of J&J's medicines, contact lenses and hip joints. The company also faces head winds from currency fluctuations and a decline in hospital admissions due to the difficult economic climate.

Yet profit for the latest quarter rose a better-than-expected 14% to $1.48 a share, the first double-digit increase in at least four years. Sales for the period rose 9%, up from the prior quarter's 8% increase and the biggest rise in more than three years.

The company has benefited from strong sales of prostate-cancer drug Zytiga, stroke-prevention drug Xarelto and diabetes drug Invokana, which was launched in the U.S. this year. J&J's over-the-counter medications business has also rebounded after running into production problems.

The company is also growing via acquisitions. In June 2012, J&J paid $20 billion to buy Synthes, a major orthopedic company. In August it acquired Aragon Pharmaceuticals, which develops cancer drugs.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas

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