Johnson & Johnson Offers Steady Stock, Dividend Gains
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.